Federal Reserve Chairman Ben Bernanke on Monday delivered a broad defense of the U.S. central bank's controversial bond-buying stimulus plan, saying it is necessary to support a flagging economic recovery.
Bernanke pushed back against accusations that the Fed's policy is laying the groundwork for inflation, enabling the government to run large budget deficits, undercutting the dollar and hurting savers.
He said that while the country's unusually weak economic performance had forced the Fed to resort to less conventional tools after lowering interest rates to effectively zero, the Fed's goals of price stability and maximum sustainable employment have not changed.
"These goals mean, basically, that we would like to see as many Americans as possible who want jobs to have jobs, and that we aim to keep the rate of increase in consumer prices low and stable," Bernanke told the Economic Club of Indiana.
In response to the financial crisis and deep recession of 2007-2009, the Fed slashed overnight borrowing costs to rock bottom and bought some $2.3 trillion in mortgage and Treasury securities in an effort to keep down long-term rates and stimulate investment.
Last month, the central bank said it would buy $40 billion in mortgage-backed securities every month until the jobs outlook improved substantially as long as inflation remained contained.
The Fed's unconventional efforts to spur growth have not been without critics, including many Republicans, who have argued they threaten future inflation and were abetting profligate spending in Washington. The party's presidential nominee, Mitt Romney, vowed if elected he would not renominate Bernanke, himself a Republican, to a third term.
Read more: http://www.reuters.com/article/2012/10/01/us-usa-fed-idUSBRE89010D20121001
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