Despite recent improvement in the job market, the Federal Reserve needs to continue its stimulus efforts to avoid endangering the recovery, the Fed chairman, Ben S. Bernanke, told Congress on Wednesday.
While acknowledging the risks of historically low interest rates and the Fed’s aggressive policy of buying government bonds to help stimulate the economy, Mr. Bernanke said in testimony that “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.”
After his opening statement, however, Mr. Bernanke seemingly opened the door a bit wider to tapering down.
Under questioning by Representative Kevin Brady, a Texas Republican who chairs the Joint Economic Committee, Mr. Bernanke said the Fed could prepare to “take a step down” in the next few meetings if the outlook for the labor market improved.
“It’s dependent on the data,” he said. “If the outlook for the labor market improves, we would respond to that.”
Mr. Brady asked if the tapering could begin before Labor Day, prompting Mr. Bernanke to say, “I don’t know.”
“We are buying a certain amount of assets each month,” he continued. “We are looking for increased confidence and in steps respond to that.”
[Full article here]