WASHINGTON (MNI) – The following is a transcript from the ongoing
news conference with Federal Reserve Chairman Ben Bernanke, in which he
comments on when the Fed is likely to begin tightening monetary policy:

REPORTER: Mr. Chairman, given what you know about the pace of the
economy now, what is your best guess for how soon the Federal Reserve
needs to begin to withdraw its extraordinary stimulus for the economy.
Could you also say what is your working definition of what extended
period means from the purposes of the fed statement?

CHAIRMAN BERNANKE: Well, currently as the statement suggests, we
are in a moderate recovery. We will be looking very carefully first to
see if that recovery is indeed sustainable, as we believe it is. We will
also be looking very closely at the labor market. We have seen
improvement in the labor market in the first quarter relative to last
year. We would like to see continued improvement, more job creation
going forward.

At the same time we are also looking very carefully at inflation.
The other part of our mandate. As I’ve noted, inflation, head line
inflation is at least temporarily higher being driven by gasoline prices
and some other commodity prices.

Our expectation is that inflation will come down towards a more
normal level, but we will be watching that carefully and also watching
inflation expectations, which, you know, which are important that they
remain well anchored if we are going to see inflation remain under good
control.

To answer your question, I don’t know exactly how long it will be
before a tightening process begins. It will depend on the outlook an
those criteria which I suggested.

The extended period language is conditioned on exactly those same
points. Extended period is conditioned on resource slack, on subdued
inflation and on stable inflation expectations.

Whence once those conditions are violated or we move away from
those conditions, that’s the time we need to begin to tighten.

Extended period suggests it would be a couple of meetings probably
before action, but unfortunately, the reason we use this vaguer
terminology is that we don’t know with certainty how quickly response
will be required and, therefore, we will do our best to communicate
changes in our view as — but that will depend entirely on how the
economy’s valves.

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

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