Fed flexible on rates
Ben Bernanke reiterated Wednesday that the U.S. Federal Reserve is not locked into any timetable for scaling back policies aimed at keeping long-term interest rates low.
The Fed chairman told Congress there is no “preset course” and that any decision to reduce its $85 billion-a-month bond-buying program — or possibly increase it — will depend on how the economy performs. The bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.
The U.S. economy is getting a lift from the housing market and gradually improvement in the job market, Bernanke said. But it is being held back by domestic spending cuts and slower growth abroad. The Fed is also closely monitoring inflation, which has fallen below the Fed’s two per cent target.
“Because our asset purchases depend on economic and financial developments, they are by no means on a preset course,” he told the House financial services committee during the first of two days of testimony this week on the Fed’s semiannual report. He will testify Thursday before the Senate Banking Committee.