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Fed stimulus needed still, Bernanke testifies

WASHINGTON — Despite signs of improvement in the job market, the chairman of the Federal Reserve, Ben S. Bernanke, and most other Fed officials signaled Wednesday that they remained cautious about easing back too quickly on their efforts to stimulate the economy.

While some Fed policy makers suggested that the central bank could begin reducing its monthly purchases of government bonds as early as next month, most still want to see continued evidence of an upswing in the job market and a decline in unemployment first, according to minutes of the most recent meeting of the Fed’s policy arm that were released Wednesday afternoon.

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Confusion on Wall Street over the Fed’s intentions led to a topsy-turvy day in the stock market. The major indicators were up in the morning after Bernanke testified to a congressional committee but then fell sharply after the meeting minutes were disclosed.

In his testimony, Bernanke said that ending the $85 billion monthly bond-buying effort too soon would do more harm than good.

‘‘A premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery,’’ he said.

While Bernanke clearly enjoys the support of a majority of the Fed’s Open Market Committee, the minutes suggested that he was finding it challenging to forge a consensus.

Under questioning from a lawmaker, Bernanke suggested that the Fed might cut back on bond purchases some time in ‘‘the next few meetings.’’ That statement took on greater significance on Wall Street after the minutes hinted at the more unnerving prospect of action as early as June.

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Still, many analysts said the odds were against a change next month. ‘‘It’s been on the minds of committee members, but I don’t think the minutes mean they’re going to collectively take their foot off the gas in June,’’ said Erik Johnson, with IHS Global Insight.

More likely, he said, would be a pullback beginning in late summer or early fall if the economy sustains its momentum. Even if that happens, the Fed will remain extraordinarily accommodative by many other measures, with short-term interest rates staying low.

In response to a question from Representative Kevin Brady, Republican of Texas, chairman of the Joint Economic Committee, Bernanke said that whenever the stimulus began to taper off, it would not happen in an ‘‘automatic, mechanistic program. Any change would depend on the incoming data.’’

Further evidence for a move in a few months, rather than weeks, came in an interview Wednesday on Bloomberg TV with the president of the Federal Reserve Bank of New York, William C. Dudley, that seemed aimed at clearing up some of the confusion.

“I think three or four months from now you’ll have a much better sense of is the economy healthy enough to overcome the fiscal drag,’’ said Dudley, a close Bernanke ally.

Outside Wall Street and the world of Fed watchers, the difference between June and August or September might not appear significant. But with interest rates at historic lows, any move to cut back on bond purchases by the Fed would undoubtedly cause an uptick in bond yields. That would affect the huge market for government and corporate bonds.

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