US could slow pace of bond buying as early as next month

Ben Bernanke struck a dovish tone yesterday as he told the US Congress that the Federal Reserve's extraordinary stimulus measures were "providing significant benefits" to the economy, although he said the central bank could "in the next few meetings" begin scaling back its programme of buying $85bn (£57bn) in bonds every month if labour market data showed signs of sustained improvement.

After Mr Bernanke testified, the minutes of the last meeting of the Federal Reserve's policy-setting Open Market Committee underlined the possibility of policy changes, showing that a number of committee members "expressed willingness" to slow the pace of the bond buying "as early as the June meeting" if there was evidence of "sufficiently strong and sustained growth". But members continued to differ on what evidence would be necessary and on the likelihood of that outcome.

"Most participants emphasised that it was important for the committee to be prepared to adjust the pace of its purchases up or down as needed to align the degree of policy accommodation with changes in the outlook for the labour market and inflation," the minutes said.

The US's top central banker was careful to emphasise the risks of too-early a reversal. "A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery," Mr Bernanke told Congress. He said the Fed would only contemplate a pullback if it had confidence that signs of improvement in the economic picture were sustainable.

He was careful not to give too much away, as Wall Street scrutinised his comments to work out when the special measures might be rolled back. "If we do that it would not mean that we are automatically aiming towards a complete wind-down," he said. "Rather, we would be looking beyond that to see how the economy evolves and we could either raise or lower our pace of purchases going forward."