Bernanke 'ready' for more support

13 July 2011 Last updated at 15:09 GMT 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."

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OECD reaffirms debt plan support

26 May 2011 Last updated at 19:24 GMT Mr Osborne has insisted the government will not be blown off course and its strategy is endorsed The head of a leading economic body has insisted he does support the UK government's deficit reduction strategy after his colleague appeared to suggest the pace of cuts might be too fast.

The OECD's chief economist Pier Carlo Padoan said earlier that UK plans might have to change if growth stayed weak.

But secretary general Angel Gurria said that would only be needed if there was "a very dramatic drop" in growth.

Labour had seized on Mr Padoan's words and urged ministers to change course.

The OECD - the Organization for Economic Co-operation and Development - has previously been supportive of the government's approach to the deficit.

'Terrible results'

But in an interview with the Times newspaper, Mr Padoan said: "We see merit in slowing the pace of fiscal consolidation if there is not good news on the growth front.

"We have seen that growth numbers are a bit weaker than expected. Should that continue to be the case, there is scope for slowing the pace."

For Labour, shadow chancellor Ed Balls described the OECD's remarks as "a very significant intervention".

"Even the OECD, which has traditionally supported government economic policy and George Osborne's deficit reduction plan, is now saying the chancellor should consider changing course," he said.

Asked later whether Mr Padoan's words signalled a watering down of the OECD's support for the government, Mr Gurria said: "Oh no, I was there.

"He was being questioned about a hypothetical example about a very dramatic drop in the rate of growth, and whether one would then have to change course.

"He said that if there are some terrible results or whatever we'll have to take a look at it. But no way was there any signal of a change in course."

Asked again if the OECD backed the coalition's deficit reduction plans, Mr Gurria said: "Absolutely. We think it's the way to go. We have said that you should stay the course and continue to support this route."

'Misleading'

The Treasury said the OECD had never swayed in its support for the government's strategy.

Conservative MP Matthew Hancock said: "Ed Balls' credibility has today sunk to a new low. His typically misleading attempt to claim the OECD's support has spectacularly backfired.

"The OECD, the IMF and every major business organisation in the UK support the Government's plan."

Speaking on Wednesday, Prime Minister David Cameron said the government had been right to prioritise deficit-reduction since coming to office and cited the fact market interest rates had fallen in the UK - while rising elsewhere in the EU - as "proof" of international support for its deficit plans.

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