Chairman Ben S. Bernanke defended the Federal Reserve’s unprecedented bond buying in his first comments since the Fed renewed the purchases last month, saying the program will spur growth, cut unemployment, help savers and support the dollar.
The central bank will sustain record stimulus even after the expansion gains strength, and policy makers don’t expect the economy to remain weak through 2015, Bernanke said today in a speech in Indianapolis. The U.S. probably won’t fall back into a recession even with growth too weak to reduce a jobless rate stuck above 8 percent since February 2009, he said in response to an audience question.
Bernanke expanded the balance sheet to $2.8 trillion from around $877 billion in August 2007. He also changed the composition of the Fed’s balance sheet, purchasing mortgage-backed securities to help lower yields for housing finance.
Fed emergency measures, including five years of low interest-rate policies, “have not led to increased inflation,” and the public’s expectations for price gains “remain quite stable,” Bernanke said today. Fed officials have the necessary tools to tighten when needed to prevent “inflationary pressures down the road,” he said.
The Fed’s third round of quantitative easing, announced Sept. 13, has no end date or fixed total amount, unlike the first two programs of bond buying. In the first, starting in 2008, the Fed bought $1.25 trillion of mortgage-backed securities, $175 billion of federal agency debt and $300 billion of Treasuries. In the second round, announced in November 2010, the Fed bought $600 billion of Treasuries.