WASHINGTON – Ben Bernanke sought to cast the Federal Reserve as a dependable custodian of the US recovery in a first-ever press conference Wednesday, as the bank began to inch away from crisis-era policies.
Heralding a second attempt to halt — and eventually reverse — stimulus spending that has helped prop up the recovery, Bernanke said the Fed would complete a $600 billion bond buy-up in June as planned.
“We’re just going to let the purchases end,” he said, hosting the first post-policy meeting press conference in the Fed’s 97-year history.
But amid high unemployment, a moribund housing market and still slow growth, Wednesday’s move was far from a full-blown retreat from emergency measures.
Bernanke signaled that after this round of spending the bank would leave the current level of stimulus in place, as it assesses whether the economy is strong enough to thrive on its own.
Since the 2008 financial crisis the Federal Reserve has lapped up assets, nearly tripling its holdings and pumping almost $1.8 trillion extra into the economy in the process.
Bernanke said that level “should essentially remain constant going forward from June,” while hinting that further spending was off the table for now.
“The trade-offs are getting — are getting less attractive at this point,” he said.
His caution might stem from the still-shaky economic outlook and the Fed’s last stalled effort to normalize policies.
Last November the central bank was forced to abort its first effort to freeze stimulus, instead restarting spending as fears grew that the world’s largest economy could suffer a double-dip recession.
But the bigger concern appears to be the economic outlook.
Earlier on Wednesday the central bank’s interest rate-setting panel noted the “economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually.”
A core of the Federal Open Market Committee’s 10 members expected growth to hit 3.1 to 3.3 percent this year, markedly less than previously expected.
The bank also said inflation would be sharply higher than expected and unemployment would be slightly lower, painting a mixed picture of the economy.
But the bank’s ambiguous stance on future stimulus is unlikely to dampen criticism that the Fed’s policies — along with rising oil and food costs — could result in a vicious spiral of rising prices that would act like a tax on consumers.
Bernanke largely waved off those concerns, insisting that volatile oil and food prices are a poor gauge of long-term inflation.
But he did express some empathy with Americans suffering under higher gasoline prices at the pump.
“Higher gas prices are absolutely creating a great deal of financial hardship for a lot of people,” he admitted.
Investors, following Bernanke’s every unscripted remark, appeared to take hope from the prospect of extended Fed stimulus, at least in the short term.
The Nasdaq hit its highest level in more than 10 years, as stocks, along with gold and silver prices, soared.
While Bernanke frequently comments on thorny and even politically charged topics, he usually does so via written statements, speeches delivered verbatim or carefully prepared congressional testimony.
Despite the risks in hosting a press conference, most observers judged the conference a success, with Bernanke managing not to upset markets with an off-the-cuff comment.
“Bernanke held a first-ever press briefing to provide ‘color and context’ for the Committee’s decision,” said David Resler of Japanese investment bank Nomura.
“In answering some rather tough and pointed questions, the chairman seems to have accomplished that goal — without unduly roiling the financial markets.”
AFP journalists cover wars, conflicts, politics, science, health, the environment, technology, fashion, entertainment, the offbeat, sports and a whole lot more in text, photographs, video, graphics and online.
Raw Story is a progressive news site that focuses on stories often ignored in the mainstream media. While giving coverage to the big stories of the day, we also bring our readers' attention to policy, politics, legal and human rights stories that get ignored in an infotainment culture driven solely by pageviews.
Founded in 2004, Raw Story reaches 9 million unique readers per month and serves more than 30 million pageviews.