By Kasra Kangarloo

WASHINGTON (MNI) – Federal Reserve Chairman Ben Bernanke Thursday
signaled an explicit willingness to use monetary policy to combat
unemployment, stressing that the Fed would not be “premature in removing
accommodation, even after the unemployment rate moves down decisively.”

Responding to questions from reporters during his now quarterly
press conference, Bernanke noted that the further action would be
contingent on a visible improvement in the economy.

He also promising additional action — either in the form of
open-market purchases or through expanded communications — if the jobs
market did not show progress.

“We’re looking for something that involves unemployment coming down
in a sustained way,” Bernanke said during the conference. “Not in a
rapid way, but we’d like to see an economy strong enough to support a
steadily improving labor market.”

This point was reiterated in Bernanke’s prepared remarks: “We will
be looking for the sort of broad-based growth in jobs and economic
activity to signal sustained improvement in labor market conditions and
sustaining employment.”

This suggests a shift from previous policy statements by the
Federal Open Market Committee, which had made open-market purchases
without explicitly committing to further purchases if the unemployment
rate did not improve.

Bernanke would not specify any single metric that the FOMC would
use to gauge the strength of the economy and the corresponding level of
monetary accommodation, noting that the committee had not yet agreed on
any single indicator.

The chairman also repeated in stronger terms that monetary policy
could not have a substantial impact on the unemployment rate without
action from other policy makers.

“We’re looking for policy makers in other areas to do their part,”
Bernanke said. “We can’t solve this problem by ourselves.”

Bernanke was also repeatedly asked by reporters about what other
tools the Fed has at its disposal in the event that the latest round of
purchases does not materially affect the economy.

He would not identify tools other than additional purchases of
Treasuries and mortgage-backed securities and Fed communications, though
he mentioned that there were “a number of possibilities.”

Responding to a question regarding inflation, Bernanke stated that
the Fed was not committing to tolerance of higher inflation than
indicated by the explicit target of 2.0%. He also noted that if
inflation were to rise while unemployment was still unacceptably high,
then the Fed would take a “balanced approach” to policy that could
account for both inflation and unemployment.

— Kasra Kangarloo is a reporter for Need to Know News

** MNI Washington Bureau: 202-371-2121 **

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