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Bernanke says stimulus measures will continue

Fed Chairman Ben Bernanke spoke at the Sonesta Hotel in Cambridge.

Jessica Rinaldi For The Boston Globe

Fed Chairman Ben Bernanke spoke at the Sonesta Hotel in Cambridge.

CAMBRIDGE — Federal Reserve chairman Ben S. Bernanke on Wednesday offered no hint when the central bank might begin to rein in the extraordinary stimulus measures of the past few years, but said the US economy will need the Fed’s help for the foreseeable future.

Bernanke, speaking to economists at the Royal Sonesta Hotel here, said the economy is improving, but unemployment remains too high, at 7.6 percent in June. That figure “if anything overstates the health of our [labor] market,” Bernanke said.

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The official unemployment rate does not include the millions of Americans who have become so discouraged that they have given up looking for jobs or had to accept part-time positions because they can’t find full-time work.

Bernanke made his comments at a conference sponsored by the National Bureau of Economic Research, a Cambridge nonprofit known for determining the beginning and end of US recessions. With signs that the US recovery is gaining traction, including solid job growth in June, economists, financial analysts, and investors are seeking indications from policy makers as to when the Fed might begin retreating from its low interest rate policies.

The Fed has maintained its key short-term interest rate near zero since the end of 2008. It has also been buying $85 billion a month of Treasury- and mortgage-backed securities as a way to hold down long-term rates, such as mortgages.

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Last month, Bernanke said the central bank planned to gradually diminish its bond purchases later this year — comments that spurred a sell-off in stock markets over concerns over the end of cheap money and the strength of the US economy. Markets, however, have recently rebounded.

Bernanke spoke in Cambridge just a few hours after the Fed released the minutes of its June 18-19 policy meeting. The minutes showed a divide among Fed officials over when the central bank should end the unconventional bond-buying program. A growing number of Bernanke’s colleagues want to end bond purchases late this year, according to the minutes.

But most still support continuing the program longer, needing to “see more evidence that the projected acceleration in economic activity would occur,” according to the minutes.

The Fed has said it plans to hold short-term interest rates close to zero for at least as long as unemployment remains above 6.5 percent. Bernanke reiterated that goal Wednesday, saying that a 6.5 percent unemployment rate will be a “threshold not a trigger” for any change in short-term interest rates.

While the housing market and auto sales have improved, in part because of low interest rates available to consumers, the economy is not growing fast enough to bring down a stubbornly high unemployment rate.

“We’re somewhat optimistic,” Bernanke said. “A fair viewing of the economy would suggest some positive features out there, positive developments. There are also some risks we have to pay attention to.”

Megan Woolhouse can be reached at mwoolhouse@globe.com.
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