WASHINGTON (MNI) The following is a transcript from the news
conference with Federal Reserve Chairman Ben Bernanke, who repeated that
the second round of large scale asset purchases was “effective”:

CHAIRMAN BERNANKE: Thank you. First, I do believe that the second
round of securities purchases was effective. We saw that first in the
financial markets. The way monetary policy always works is by easing
financial conditions. We saw increases in stock prices. We saw reduced
spreads in credit markets. We saw reduced volatility. We saw all the
changes in financial markets and quite significant changes one would
expect if one were doing a normal easing of policy regarding the federal
funds rate.

Indeed we saw the same type of financial responses in the first
round which began in March of 2009.

So we were able to get the financial easing that we were trying to
get. We did get very significant easing from this program.

You would expect based on decades of experience that easing
financial conditions would lead to better economic conditions. And I
think the evidence is consistent with that as well.

As I discussed in more detail in my Humphrey Hawkins testimony at
the beginning of March, between late August when I first indicated that
the Federal Reserve was seriously considering this additional step and
early this year, not only the Federal Reserve but many outside
forecasters upgraded their forecasts and we saw strengthening labor
market conditions, higher rates of payroll, job creation, et cetera.

Now, the conclusion, therefore, that the second round of securities
purchases was ineffective could only be validated when one thought that
this step was a panacea, that it was going to solve all the problems and
return us to full employment overnight.

We were very clear from the beginning while we thought this was an
important step and that it was at an important time when we were all
worried about a double dip and we were worried about deflation, we were
very clear that this was not going to be a panacea. That it was only
going to turn the economy in the right direction and indeed we published
some analytics which gave job creation numbers which were significant,
but not, certainly not enough to completely solve the enormous jobs
problem that we have.

So again, relative to what we expected, anticipated, I think the
program was successful. Why not do more? Again, this was similar to the
question I received earlier. The trade-offs are getting less attractive
at point. Inflation has gotten higher. Inflation expectations are a bit
higher.

It is not clear that we can get substantial improvements in
payrolls without some additional inflation risk. In my view if we are
going to have success in creating a long-run sustainable recovery with
lots of job growth, we have to keep inflation under control.

We have to look at both parts of the mandate as we choose policy.

** Market News International Washington Bureau: (202) 371-2121 **

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