Federal Reserve Chairman Ben Bernanke said increased interest rates since the central bank expanded record monetary stimulus reflect an improved economic outlook, not a failure in the Fed’s program of buying bonds.
“Interest rates are higher, but I think that’s mostly because the news is better,” Bernanke said Thursday at a forum in Arlington, Va., hosted by the Federal Deposit Insurance Corp. “It’s responding to a stronger economy and better expectations. So I think that the policy has helped.”
Yields on 10-year Treasurys have risen to 3.3 percent Thursday from 2.57 percent Nov. 3, when the Fed approved buying $600 billion of Treasurys in a move criticized by Republican lawmakers and some foreign governments. Bernanke said he’s more optimistic for a pickup in U.S. growth this year that may boost credit to small businesses, as well as their sales.
“We see the economy strengthening,” Bernanke said as part of a panel discussion on boosting lending to small businesses. “It looks better in the last few months. We think that a 3 to 4 percent-type of growth number for 2011 seems reasonable.
“Now you’re not going to reduce unemployment at the pace that we’d like it to,” Bernanke said. “But certainly it would be good to see the economy growing. That means more sales, more business for companies of all sizes.”
Bernanke and his Fed colleagues are trying to determine the reasons for a weak flow of credit to small companies and to identify ways other than continued record monetary stimulus to reduce an unemployment rate close to a 26- year high.
“We’re seeing some improvement in the labor market,” and the risk of deflation has “receded considerably,” he said.
