Ben Bernanke prepares for Fed exit with upbeat assessment

 

The Federal Reserve remained committed to highly accommodative monetary policy despite having trimmed its bond-buying stimulus programme, Ben Bernanke said on Friday in what could be his last speech as Fed chairman.

Mr Bernanke, who is set to be succeeded by his deputy Janet Yellen as head of the US central bank at the end of this month, gave an upbeat assessment of the economy in coming quarters. But he tempered the good news in housing, finance and fiscal policy by repeating that the overall recovery “clearly remains incomplete”.

Coming as a surprise to some, the Fed decided last month to cut its bond-buying programme, known as quantitative easing or QE, by $10bn (£6bn) to $75bn a month. It cited a stronger job market and economic growth in its decision, which amounted to the beginning of the end of the largest monetary policy experiment ever.

But that decision “did not indicate any diminution of [the Fed’s] commitment to maintain a highly accommodative monetary policy for as long as needed,” Mr Bernanke told the American Economic Association.

“Rather, it reflected the progress we have made toward our goal of substantial improvement in the labour market outlook that we set out when we began the current purchase programme in September 2012,” he said.

To recover from the deep 2007-09 recession, the Fed has held interest rates near zero since late 2008. It also has quadrupled the size of its balance sheet to about $4 trillion through three huge rounds of government bond purchases – effectively injecting new money into the economy – aimed at holding down longer-term borrowing costs.

The Fed’s extraordinary money-printing has helped drive stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets last year as investors moved funds in anticipation of an end to the easing.

Mr Bernanke said the Fed had other tools – including adjusting the interest rate on excess bank reserves and so-called reverse repurchase agreements, or repos – to return to a normal policy stance without resorting to asset sales.

“It is possible, however, that some specific aspects of the Federal Reserve’s operating framework will change,” he said.

“The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for US economic growth in coming quarters.”

But he added: “Of course, if the experience of the past few years teaches us anything, it is that we should be cautious in our forecasts.”

Reuters

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee