US Federal Reserve chairman Ben Bernanke defended quantitative easing, saying it has helped the economy and shows no immediate sign of creating an asset price bubble.
“We don’t think that financial stability concerns should at this point detract from the need for monetary policy accommodation, which we are continuing to provide,” he said on Thursday.
Currently, asset prices are broadly in line with historical norms, he said.
Bernanke is seeking to define his legacy before stepping down on Jan. 31. During his eight-year tenure as Fed leader, he piloted the economy through a financial crisis that led to the longest recession since the 1930s.
He has tried to bolster growth by holding the target interest rate near zero and pushing forward with quantitative easing (QE).
“Those who have been saying for the last five years that we’re just on the brink of hyperinflation, I think I would just point them to this morning’s CPI number and suggest that inflation is not really a significant risk of this policy,” Bernanke said.
He was referring to a Labor Department report showing the consumer price index rose 1.5 percent in the past year. The Fed has set an inflation target of 2 percent.
Bernanke answered questions from Liaquat Ahamed, the author of Lords of Finance: the Bankers Who Broke the World, which focuses on the failure of central bankers, starting in 1929, to avert the Great Depression.
Asked if the Fed’s efforts to fuel growth are creating asset-price bubbles, Bernanke said the Fed is “extraordinarily sensitive” to risks of financial market instability.