WASHINGTON (MNI) – Following are excerpts of Federal Reserve
Chairman Ben Bernanke’s introductory remarks at the post-FOMC press
conference:

Projections are based on the assumption that monetary policy is
appropriate, these longer run projections can be interpreted as
indicating the inflation rate that committee participants judge to be
most consistent with the Federal Reserve’s mandate to foster maximum
employment and stable prices.

At 1.7 to 2.0 percent the mandate consistent rate of inflation is
greater than zero for a number of reasons. Perhaps most important,
attempting to maintain inflation at zero would increase the risks of
experiencing an extended bout of deplages or falling wages and prices
which in turn could lead employment to fall below the maximum
sustainable level for a protracted period.

Hence, the goal of literally zero inflation is not consistent with
the Federal Reserve’s dual mandate.

Indeed most Central Banks around the world aim to set inflation
above zero, usually at about 2 percent.

I turn now to the next’s economic outlook. As indicated in today’s
policy statement the committee sees the economic recovery as proceeding
at a moderate pace.

Household spending and investment in equipment and software
continue to expand supporting the recovery, but nonresidential
investment is weak and the housing sector is depressed. Labor market,
overall conditions continue to improve gradually. For example, the
unemployment rate moved down a bit further and payroll employment
increased in March.

New claims for unemployment insurance and indicators of hiring
plans are also consistent with continued improvement.

Looking ahead, committee participants expect moderate recovery to
continue through 2011 with some acceleration of growth projected for
2012 and 2013. Specifically as the table shows, participants projections
for output growth have a central tendency of 3.1 to 3.3 percent for this
year but rise to 3.3 percent in 2012 and about the same in 2013.

These projections are a little below those made by the committee in
January.

The mark down of growth in 2011 in particular reflects the somewhat
slower than anticipated rate of growth in the first quarter.

The outlook for above trend growth is associated with the projected
reduction in unemployment rate which is seen ending down 8.4 to 8.7
percent in the fourth quarter of this year and declining gradually 7.8
to 7.2 percent in 2013, well below the tendency of 5.2 to 5.6 percent.

The projected decline in the unemployment rate is relatively slow,
largely because economic growth is projected to be only modestly above
the trend growth rate of the economy.

On the inflation front, commodity prices have risen significantly
recently, reflecting geo political developments and robust global
demand, among other factors.

Increases in commodity prices are in turn boosting overall consumer
inflation.

However, measures of underlying inflation, though having increased
modestly in recent months remain subdued and longer term inflation have
remained stable. Consequently the committee expects the higher commodity
prices to be transitory.

As the increases in commodity prices moderate, inflation should
decline toward its underlying level. Specifically, participants
projections for inflation have a central tendency of 2.1 to 2.8 percent
for this year, noticeably higher than in the January projections.

Before declining to 1.2 to 2.0 percent in 2012 and running 1.4 to
in 2013, both about the same as in January.

The committee’s economic projections provide important context for
understanding today’s policy action as well as the committee’s general
policy strategy.

Monetary policy affects output and inflation with a lag. So current
policy actions must be taken with an eye to the likely future course of
the economy.

Thus the committee’s projections of the economy, not just current
conditions alone, must guide its policy decisions.

The lags with which monetary policy affects the economy also imply
that the committee must focus on meeting its mandated objectives over
the medium term, which can be as short as a year or two but may be
longer depending on how far the economy is initially from conditions of
maximum employment and price stability.

To foster maximum employment the committee sets policy to try to
achieve sufficient economic growth to return the unemployment rate over
time to its long-term normal level.

At 8.8 percent the current unemployment rate is elevated relative
to that level and progress towards more normal levels of unemployment
seems likely to be slow.

The substantial ongoing slack in the labor market and the
relatively slow pace of improvement remain important reasons that the
committee continues to maintain a highly accommodateive monetary policy.
In the medium term the ext seeks to achieve a mandate consistent
inflation rate which participants longer term projections for in– is 2
percent or a bit less.

Although the recent surge in commodity prices led to pick up
somewhat in the long-term, the committee predicts inflation will return
to consistent levels in the medium term as I have discussed.
Consequently, the short-term increase in inflation has not prompted the
committee to tighten policy at this juncture. Importantly however the
committee’s outlook for inflation is presented date indicated on longer
term inflation remaining stablement if households and firms expect
inflationto to return to a mandate consistent level in the medium term,
then increased commodity price are unlikely to produce secondary round
effects in which inflation takes hold in non-commodity price and in
nominal wages. Thus besides monitoring inflation itself the committee
will pay close attention to be inflation expectations and to possible
indications of second round effects.

In providing extraordinary monetary policy accommodation in the
aftermath of the crisis, the committee has not only reduced the target
for federal funds rate to a very low level but also expanded the Federal
Reserves balance sheet substantially.

The committee at this meeting continues ongoing discussion of the
available tools for removing policy accommodation at such time as that
should become appropriate.

The committee remains confident that it has the tools that it needs
to tighten monetary policy when it is determined that economic
conditions warrant such a step.

In choosing the time to begin policy normalization as well as the
pace of that normalization, we will carefully consider both parts of our
dual mandate.

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

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