WASHINGTON (AFP) – Federal Reserve Chairman Ben Bernanke said Wednesday that the Fed’s easy-money policy is still necessary, throwing cold water on fresh market expectations that the Fed’s stimulus would soon be ended.
Bernanke told an audience of economists in Cambridge, Massachusetts, that the jobs market remains too weak and inflation remains too low for comfort.
He also warned that the full impact of steep government spending cuts initiated in March was yet to be seen.
Together, the evidence underscored the need for the Fed to keep in place its highly accommodative monetary policy, he said.
“Both the employment side and the inflation side are saying that we need to be more accommodating,” he said, answering questions after a speech.
“Moreover, the other portion of macroeconomic policy, fiscal policy, is now actually quite restrictive…. Put that all together, I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.”
His comments came just hours after the release of the minutes from the June 18-19 meeting of the Fed’s policy board, the Federal Open Market Committee, which suggested the central bank would move more rapidly toward winding up its $85 billion a month stimulus program.
The minutes said that about half of the FOMC policy makers wanted to fully end QE, or quantitative easing, by the end of this year, six months earlier than the mid-2014 timeline that Bernanke laid out to reporters after that meeting.