US Federal Reserve Chairman Ben Bernanke strongly defended the central bank’s monetary stimulus before the US Congress on Tuesday, easing financial market worries over a possible early retreat from bond purchases.
Bernanke said Fed policymakers are cognizant of the potential risks of their extraordinary support for the economy, including the possibility that it might fuel unwanted inflation or stoke asset bubbles.
However, in testimony on the central bank’s semi-annual report on monetary policy, he said the risks did not seem material at the moment, adding that the bank has all the tools it needs to retreat from its monetary support in a timely fashion.
Photo: Reuters
“We do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation,” Bernanke told the US Senate Committee on Banking, Housing and Urban Affairs.
The Fed chairman also urged lawmakers to avoid sharp spending cuts set to take effect tomorrow, warning that they could combine with earlier tax increases to create a “significant headwind” for the US’ modest economic recovery.
In response to the financial crisis and deep recession of 2007 to 2009, the Fed not only slashed official interest rates effectively to zero, but also bought more than US$2.5 trillion in mortgage and US Treasury debt in an effort to push down long-term interest rates and spur hiring.
The Fed is currently buying US$85 billion in bonds each month and has said it plans to keep purchasing assets until it sees a substantial improvement in the outlook for the labor market.
Bernanke’s testimony and stronger-than-expected data on housing and consumer confidence helped settle jitters in US stock markets over the EU’s debt crisis, with the Dow Jones industrial average closing up nearly 116 points, or 0.8 percent.
“What Bernanke is saying, bottom line, indicates that there will not be a reversal anytime soon in the stimulus program,” Rockwell Global Capital chief market economist Peter Cardillo said in New York.
When asked pointedly by Republican Senator Bob Corker whether the Fed’s easy policies were contributing to competitive currency devaluations globally and laying the groundwork for inflation, Bernanke was unequivocal.
“My inflation record is the best of any Federal Reserve chairman in the post-war period,” he retorted. “We are not engaged in a currency war.”
Democrats seized on Bernanke’s remarks to fuel their argument that looming budget cuts could have a dire economic impact, as they sought to gain political advantage over Republicans, who prefer spending cuts over higher taxes.
Committee newcomer Elizabeth Warren, a Democrat, pressed Bernanke on what she said is an implicit subsidy that large banks enjoy in the form of lower borrowing costs from being perceived as too big to fail.
Bernanke replied that the Dodd–Frank Wall Street Reform and Consumer Protection Act had given regulators more power to wind down failing financial institutions, making the issue less of a concern.
“The subsidy is coming because of market expectations that the government would bail out these firms if they fail. Those expectations are incorrect,” Bernanke said.
In unusually direct remarks on fiscal policy, Bernanke warned that the spending cuts known as the sequester that are set to take hold later this week would threaten an already challenged economic expansion.
“The Congress and the administration should consider replacing the sharp, frontloaded spending cuts required by the sequestration, with policies that reduce the federal deficit more gradually in the near term, but more substantially in the longer run,” Bernanke said.
The US economy braked sharply in the fourth quarter, but is forecast to grow about 2 percent or more this year. The unemployment rate has remained elevated and registered 7.9 percent last month.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last