WASHINGTON — Federal Reserve Chairman Ben Bernanke emphasized Wednesday that the central bank remained committed to bolstering the economy, insisting that any deceleration in the Fed’s stimulus campaign will happen because it is achieving its goals, not because it has lowered its sights.
Bernanke said he still expected to reach that point in the coming months but, in what might have been his final appearance before the House Financial Services Committee, he cautioned that Congress itself posed the greatest risk to growth.
“The risks remain that tight federal fiscal policy will restrain economic growth over the next few quarters by more than we currently expect, or that the debate concerning other fiscal policy issues, such as the status of the debt ceiling, will evolve in a way that could hamper the recovery,” he said.
The sluggish economy has been a constant background for Bernanke’s biannual testimony. Unemployment, at 7.6 percent, remains stubbornly above the Fed’s goals. Inflation has sagged to the lowest pace on record. Growth continues at a “modest to moderate pace,” the Fed said Wednesday in its monthly Beige Book survey of economic conditions across the country.
Bernanke’s message Wednesday was that the Fed would cut back on its monthly asset purchases — $85 billion of mortgage backed securities and Treasury securities — only if conditions were improving. If unemployment instead stays high and growth rates do not improve, the Fed will keep buying bonds. If inflation stays low, the Fed will keep buying bonds. If longer term interest rates go up, the Fed will keep buying bonds.
Bernanke revived a talking point from earlier this year, insisting that the Fed was willing to buy more than $85 billion a month. “Because our asset purchases depend on economic and financial developments, they are by no means on a preset course,” Bernanke told the committee.
Even as Bernanke said the Fed would keep its options open, he continued to suggest that the Fed would like to start reducing its asset purchases this year and end them as soon as possible. If the economy needs more stimulus, the Fed would prefer to extend its policy of holding short-term interest rates near zero.
The Fed’s course will not be determined by Bernanke for much longer. He is widely expected to step down at the end of his second term in January. Members of both parties took the opportunity to praise him, although Republicans generally added that they opposed the Fed’s recent efforts. No one paid much attention to the finger Bernanke had pointed at them.
“You acted boldly and decisively and creatively — very creatively I might add,” said the committee’s chairman, Jeb Hensarling, Republican of Texas.
“You’ve had a lot of compliments today. In my business it’s called a eulogy,” said Emanuel Cleaver, Democrat of Missouri, who is an ordained minister.