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Bernanke promises Fed will be flexible on stimulus wind down


Bernanke promises Fed will be flexible on stimulus wind down


Choosing his words carefully, Federal Reserve Chairman Ben Bernanke has tiptoed through a policy statement about when the US central bank will start scaling back its massive stimulus programme.

Conscious of the fact that his words move markets and that he sparked a brief but fierce global share sell-off last month Bernake left plenty of room for maneuver.

Consequently, he confirmed the Fed’s bond purchases will wind down later this year. But he said that policy is not set in stone and depends on the US economy continuing to improve.

In his testimony to Congress Bernankesaid: “The committee’s decisions regarding the asset purchase programme, and the overall stance of monetary policy, depend on our assessment of the economic outlook and the cumulative progress towards our objectives. Of course economic forecasts must be revised when new information arrives and are thus necessarily provisional. As I noted the economic outcomes that committee participants saw as most likely – in their June projections – involve continuing gains in labour markets, supported by moderate growth that picks up over the next several quarters as the restraint from fiscal policy diminishes.”

The final part of his comment was a reference to the growth curbs from higher taxes and cuts in government spending earlier this year from the so-called fiscal cliff.

Bernanke repeated the Fed will keep interest rates near zero as long as the US unemployment rate remains about 6.5 percent and as long as inflation stays in check.

Most do not expect rates to rise until sometime in 2015.

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