Fed’s Jobs Battle Eclipses Inflation Concerns

Fed links duration and extent of new round of asset purchases to 'sustained improvement' in jobs market.

Ben S. Bernanke for the first time pledged that the Federal Reserve will buy bonds until the economy gets closer to his goals, cementing his place as the Fed’s most innovative chairman and signaling the battle against unemployment eclipses any concerns about inflation for now.

The central bank yesterday announced its third round of large-scale asset purchases since 2008, with the difference that it didn’t set any limit on the ultimate amount it would buy or the duration of the program. Instead, Bernanke said stimulus will be expanded until the Fed sees “sustained improvement” in the labor market.

Inflation Expectations

That history enables Bernanke to add to his stimulus without unhinging inflation expectations, said Neal Soss, chief economist for Credit Suisse Group AG in New York.

Dual Mandate

The Fed’s dual mandate from Congress calls on it to balance the objectives of stable prices and maximum employment. Brady has drafted legislation that would limit the Fed’s purchases to Treasury securities and remove full employment from their mandate, among other measures. He says the bill has about 40 co-sponsors.

Hasn’t Materialized

Surging inflation hasn’t materialized. Since then, the personal consumption expenditures price index has climbed at an average rate of about 2.2 percent, close to the Fed’s target of 2 percent. The index rose 1.3 percent in July from a year earlier.

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