US Federal Reserve Chairman Ben Bernanke yesterday reiterated that its stimulus could be wound up next year if economic growth remains steady as forecast.
However, Bernanke warned that government spending cuts continue to threaten growth and that tapering the bond-purchase program is “by no means” a “preset course.”
In prepared testimony to Congress, Bernanke said the end to the US$85 billion-a-month program, known as quantitative easing (QE), program did not mean the Fed was ready to begin tightening monetary policy with interest-rate hikes.
With unemployment still high and falling slowly and inflation very low, “a highly accommodative monetary policy will remain appropriate for the foreseeable future,” he said.
Bernanke reiterated the path for the QE program that he laid out after the last month’s policy meeting of the Federal Open Market Committee: that the Fed could begin cutting the bond investments later this year and wind up the program entirely by the middle of next year, if the economy grows as the committee members expect.
Addressing the jump in bond yields that answered that plan, he reiterated that the stimulus taper did not mean the Fed was ready to tighten its ultra-low interest rates.
And he stressed that QE would remain in place if needed.
“I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course,” Bernanke said.