The U.S. economy still needs help from the Federal Reserve’s low interest rate policies, Chairman Ben Bernanke said here on Wednesday.
Mr. Bernanke told the National Bureau of Economic Research that because unemployment remained high and inflation was below the Fed’s target, the policies were still necessary. He also said the economy was also being held back by higher taxes and federal spending cuts.
“If you put all of that together, you can only conclude that highly accommodative monetary policy for the foreseeable future is what is needed for the U.S. economy,” Mr. Bernanke said.
Bernanke’s comments were his latest effort to stress that the Fed would continue to stimulate the economy, even after it began to slow its bond purchases. The Fed planned to keep its investment holdings constant to avoid causing long-term rates to rise too quickly. It also planned to keep short-term rates at record lows.
And, Mr. Bernanke has said 6.5 per cent unemployment is a threshold, not a trigger — The Fed might decide to keep its benchmark short-term rate near zero even after unemployment falls that low.
Unemployment is now 7.6 per cent.
On Wednesday, Mr. Bernanke didn’t signal any changes in the Fed’s bond-buying programmes, which have kept long-term interest rates low and encouraged more borrowing and spending. But he defended the recent comments he made after the Fed’s June meeting .
Mr. Bernanke had earlier said the Fed would likely slow its bond purchases later this year and end them around mid-2014 if the economy continued to strengthen.