By Steven K. Beckner
(MNI) – To Wall Street’s delight, Federal Reserve Chairman Ben
Bernanke signalled once more that the Fed will keep interest rates at
very low levels for some time to come in Congressional testimony
Thursday.
Bernanke said there will come a time when the Fed will need to
tighten its unprecedentedly easy money policies and said the Fed has the
tools to do so. But he made clear he is no hurry to raise rates.
Last Tuesday, the Fed’s policymaking Federal Open Market Committee
left the key federal funds rate near zero and repeated its expectation
that the benchmark short-term rate will stay “exceptionally low … for
an extended period.” Bernanke echoed that sentiment as he testified to
the House Financial Services Committee.
In prepared testimony, he said “the economy continues to require
the support of accommodative monetary policies.” And in response to
questions, he reaffirmed that the high level of unemployment and low
rate of inflation will continue to justify very low rates “for an
extended period.”
Bernanke said that “extended period” is an indefinite time frame
that is contingent on economic and financial conditions. While the Fed
will not wait until the economy is fully recovered, he said it will wait
until the economy is on “a sustainable growth path” and payrolls are
growing.
While the Fed is monitoring both inflation and inflation
expectations, it is high unemployment that is the Fed’s main focus,
Bernanke strongly suggested. He also put a good deal of emphasis on the
need to spur bank lending, especially to small business.
Bernanke also made clear the Fed will go slow in selling assets to
reduce its balance sheet, although he said the Fed is not rolling over
maturing securities.
He repeated his warnings about the need to reduce federal budget
deficits, calling the U.S. fiscal outlook “somewhat dark.”
-more-
** Market News International **
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