–Repeats FOMC Continues To Monitor Econ And Will Act As Needed.

WASHINGTON (MNI) – The following is an excerpt from Federal Reserve
Chairman Ben Bernanke’s comments Wednesday during a press conference
following the FOMC policy decision announcement:

Question:

Mr. Chairman could you describe the situation in Greece and in
Europe whether it was discussed at the meeting and what policy
conclusions were reached and also whether or not in response to the
recent slowdown there was a discussion about further easing?

Bernanke:

With respect to Greece that’s obviously very important, it’s a very
difficult situation. We’ve been in close communication with our
colleagues in Europe, obviously not part of the negotiations but we’ve
been kept well informed. We had a G-7 call over the weekend, for
example.

I think the Europeans appreciate the incredible importance of
resolving the Greek situation. If there were a failure to resolve that
situation it would pose threats to the European financial system, the
global financial system and to European political unitity, I would
conjecture as well. So, yes, we did dsicuss it, it’s one of several
potential financial risks that we’re facing now. But, again, we’re
mostly just following the situation closely and making sure that as best
we can that our own institutions are well positioned relative to
sovereign debt in the so-called peripheral countries.

With respect additional asset purchases, we haven’t taken action
obvisouly today. We will be reviewing the outlook going forward. It will
be a committee decision.

I think the point I would make though in terms of where we are
today versus where we were say in August of last year when I began to
talk about asset purchases, is that at that time inflation was very low
and falling, many objective indicators suggested that deflation was a
non trivial risk and I think that the securities purchases have been
very successful in eliminating deflation risk. I don’t think people
appreciate necessarily that deflation can be a very pernitious situation
where it could have very long-lasting effects on economic growth.

In addition, growth in payrolls has actually picked up in the four
months before the Jackson Hole speech in August. There was about an
80,000 per month payroll increase. So far in 2011, including May, the
average is closer to $180,000, so there has been an improvement in the
labor market albeit not as strong as we would like. As of last August we
were essentially missing significantly on both sides of our mandate:
inflation was too low and falling and unemployment looked like it may be
beginning to rise again. In that case the case for monetary action was
pretty clear in my mind. I think we were in a different position,
certainly not where we would like to be but closer to the dual mandate
objectives than we were at that time. So, again, the situation is
different today than last August but we will continue to monitor the
economy and act as needed.

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

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