Tepid Economy and High Unemployment Could Prompt Fed to Resume Bond Buying, Bernanke Says

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Federal Reserve chairman Ben Bernanke suggested this week that the economic malaise gripping the U.S. could continue over the next few years, warranting yet another round of aggressive monetary maneuvers from the Fed.

Bernanke said on Wednesday that the period of slow growth could ultimately persist through 2014, some seven years after the 2007 collapse of the credit bubble. Amid stalling growth and growing concerns over long-term unemployment expectations, the U.S. economy is also facing deflationary pressures, Bernanke asserted.

In an effort to increase liquidity and allay such concerns, he said the Fed could purchase securities over the coming months. Bernanke has already presided over two rounds of quantitative easing designed to spur hiring and lending.

If high unemployment persists and inflation remains below 2 percent, the Fed could implement a third round of asset purchases, Bernanke indicated. He said the Federal Open Market Committee "recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation."

Bernanke also said the Fed does not intend to raise interest rates until late 2014, citing a subdued inflation rate and the stumbling economic outlook. Since 2008, the Fed has purchased more than $2.3 trillion worth of long-term securities and enacted policies that have kept interest rates near zero.



 



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This article appears in: News Headlines , Bonds , Economy , US Markets

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