Ben Bernanke tries to soothe nerves in jittery markets

US monetary policy is not on a “preset course” and a “highly accommodative” stance “is appropriate for the foreseeable future,” Ben Bernanke said, in a bid to reassure jittery markets.

Testifying before the US House of Representatives Committee on Financial Services, the chairman of the Federal Reserve said that, while the central bank still expects to begin scaling back its extraordinary stimulus measures later this year, it was flexible and might change its mind depending on the trends in economic data. The Fed currently buys $85bn (£56bn) government and mortgage bonds each month.

Referring to the Fed’s policy-setting Open Market Committee, Mr Bernanke said: “The economic outcomes that committee participants saw as most likely in their June projections involved more gains in labour markets, supported by moderate growth that picks up in the coming quarters as the restraint from fiscal policy diminishes.”

“If the data was broadly consistent with these projections, it would be appropriate to moderate the monthly pace of purchases later this year,” he added. “If the data continued to confirm economic improvement and normalising inflation, we would expect to continue to reduce the pace of purchases, ending them around mid-year.”

Mr Bernanke first outlined the timeline earlier this year, triggering sharp swings in markets around the world as investors worried about the possibility of the Fed rolling back its stimulus measures sooner than expected.

Yesterday, in what may be the last of his appearances before Congress, with most observers expecting him to step down early next year, he sought to soothe nerves by stressing that nothing was set in stone. “If the outlook for employment became relatively less favourable, if inflation didn’t move back towards 2 per cent, or if financial conditions – which have tightened recently – meant we couldn’t attain our mandated objectives, the pace of purchases could be maintained longer,” he said.