Ben Bernanke said the Fed expects to keep interest rates near zero "for an extended period" The chairman of the Federal Reserve, Ben Bernanke, has said the US central bank is prepared to renew stimulus efforts if the economy remains weak.The Fed's second quantitative easing programme (QE2) ended two weeks ago.
Speaking to members of Congress, Mr Bernanke also said the US could expect only "moderate" growth over the coming quarters.
He added that the inflation pressures seen in the first half of 2011 were "transitory" and should ease.
He cited higher commodity prices and the earthquake in Japan, which led to parts shortages and drove up vehicle prices, as reasons for why inflation picked up.
The Fed expects to keep its ultra-low interest rate policy in place "for an extended period", he said.
The dollar extended earlier losses against the euro following Mr Bernanke's comments, with the euro rising more than a cent to $1.4088.
Revised forecasts"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," Mr Bernanke said.
"However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate."
He added that Fed forecasts for June, which had already been significantly revised down from April, had not incorporated recent data such as last week's employment report.
That data showed that job creation all but ground to a halt last month, with only 18,000 new jobs created, and the unemployment rate rising to 9.2%.
Analysts said that Mr Bernanke had only raised the possibility of a further stimulus, and was not saying that it was necessary.
"In general, Bernanke's testimony has not changed our view that monetary policy is on hold," said Dana Saporta, economist at Credit Suisse in New York.
"The hurdle for a QE3 is too high right now, but if the European peripheral crisis intensifies, further policy accommodation might be considered."
No comments:
Post a Comment