WASHINGTON (MNI) – The following is an excerpt from Federal Reserve
Chairman Ben Bernanke’s press conference Wednesday.
QUESTION:
Looking back on the last four years of policy, it is been bold but
halting. You did QE-2 and operation twist, saying it would end in June,
now you extended it. How would you respond if, in several years a grad
student said you know what the problem was with fed policy at this time,
it was too incremental and the reason the economy underperformed was
because of incrementalism and what do you think about todays action
also being too incremental?
BERNANKE:
We cut the fund rate continuously until December of 2008. Since
then we operate with nonstandard monetary tools, including asset
purchases and extension of maturities. By their nature, they tend to be
lumpy. We haven’t done them in a continuous way, but our view of the
effects is the portfolio determines the level of accommodation that the
economy is receiving. In that respect, it wouldn’t really be a start and
stop. Rather, whenever we have stopped purchasing the level of
accommodation already in the system, it remains there until conditions
warrant further action. Underlying all this, of course, is the fact that
the outlook has changed. Like many other forecasters, the Federal
Reserve was too optimistic early on about the pace of recovery. We have
had to add additional accommodation going forward, as we have seen in
fact that the headwinds keep the economy from being as strong as we with
would like. Again, by the nature of these unconventional tools, they
tend to be more discreet in size, but they continue to have
accommodation affects even after pattern of purchase. We are prepared to
take further steps if necessary to promote sustainable growth and
recovery in the labor market. We are prepared to do what is necessary.
We are prepared to provide support for the economy.
** MNI Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MT$$$$]
