The US central bank, the Federal Reserve, says interest rates there will likely stay low for an “extended period” and that – as originally planned – it will complete its 600 billion dollar stimulus programme, which involves buying back government bonds, in June.
That marks a near-conclusion – at least for now – of the massive Fed effort to pull the US economy out of its deep recession.
Fed chairman Ben Bernanke admitted to reporters that there are many factors out its control: “The economy’s longer term rate of growth and unemployment are determined largely by non-monetary factors, such as the rate of growth of labour force and the speed of technological change, and it should be noted that estimates of these rates are inherently uncertain and subject to revision over time.”
On the stubbornly high unemployment rate, Bernanke said conditions are gradually improving .. but added “We are digging outselves out of a deep hole.”
In his first ever such news conference, which was part of an attempt by Bernanke to make the Fed more accountable, he said the economic recovery is continuing at a moderate pace but that growth in the first quarter would be weak – under two percent – but that was due to transitory factors, including lower defence spending and exports as well as the winter weather.
On inflation the fed does not appear to have long term worries and said higher prices for oil and other commodities would not last.
The historic news conference was the first of three to be held this year at the Fed and Bernanke had watched recordings of his European counterparts – Jean-Claude Trichet of the European Central Bank and Mervyn King of the Bank of England to see how they dealt with reporters questions.
There were few surprises in the Fed’s statement and financial markets largely took it in stride. Shares inched higher, the dollar held roughly steady and bonds cut losses.