Federal Reserve Chairman Ben S. Bernanke defended the central bank’s record stimulus program under questioning from lawmakers, telling them that ending it prematurely would endanger a recovery hampered by high unemployment and government spending cuts.
“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 and causing inflation to fall further,” Bernanke said today in testimony to the Joint Economic Committee of Congress in Washington.
Bernanke lamented the human and economic costs of an unemployment rate at 7.5 percent nearly four years into the recovery from the deepest recession since the Great Depression, and said the Fed’s easing is providing “significant benefits.” His comments echoed remarks by William C. Dudley, president of the Federal Reserve Bank of New York, who said in an interview that it would take three to four months before policy makers will know whether a sustainable recovery is in place.
Fed officials “need to see inflation expectations remain in a desired range, they need to see that the peak home-buying season goes as well as it can, and they need to see that we have absorbed the bulk of the huge fiscal consolidation” before they reduce the pace of purchases from $85 billion a month, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.