| |
| |
 |
| |
|
| |
|
| |
|
WASHINGTON: Federal Reserve chairman Ben Bernanke said on Wednesday that "accommodative" monetary policies are still needed to sustain an economic recovery but that the central bank can exit from its stimulus "at the appropriate time."
Bernanke, in remarks prepared for a congressional hearing, also said the Fed was considering a new benchmark target based on the rate paid on commercial bank deposits at the Fed, which might better reflect lending conditions.
The comments were released by the Fed even though the hearing by the House Financial Services Committee was cancelled due to winter storms pounding Washington.
"The economy continues to require the support of accommodative monetary policies," Bernanke said.
"However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus. We have full confidence that, when the time comes, we will be ready to do so."
The hearing on "Unwinding Emergency Federal Reserve Liquidity Programmes and Implications for Economic Recovery" was called by congressional leaders eager for a detailed explanation to date on the exit strategy from Bernanke, who last month won a tough confirmation battle for a second four-year term.
Bernanke's comments offered no specific timeline for the Fed to move away from its massive stimulus that has included a cut in the federal funds rate to a range of zero to 0.25 percent and an array of programs to pump more than one trillion dollars into the economy.
He repeated that this effort is likely to remain in place "for an extended period," the same phrasing used by the Federal Open Market Committee.
"In due course, however, as the expansion matures the Federal Reserve will need to begin to tighten monetary conditions to prevent the development of inflationary pressures," he said.
"The Federal Reserve has a number of tools that will enable it to firm the stance of policy at the appropriate time."
Significantly, Bernanke said the federal funds rate, which is the rate charged on interbank loans, may be a less reliable barometer of overall conditions and that the Fed may start using a new benchmark target.
He said the rate paid on commercial bank reserves kept at the Fed may be a better tool, since it establishes a floor for lending.
"The Federal Reserve is considering the utility, during the transition to a more normal policy configuration, of communicating the stance of policy in terms of another operating target, such as an alternative short-term interest rate," he said.
"In particular, it is possible that the Federal Reserve could for a time use the interest rate paid on reserves, in combination with targets for reserve quantities, as a guide to its policy stance, while simultaneously monitoring a range of market rates." - AFP/de
|
