WASHINGTON — Federal Reserve Chairman Ben Bernanke left open the possibility Wednesday of further Fed action to stimulate the economy.
Speaking at a news conference, Bernanke walked a fine rhetorical line: He signaled that the Fed would act more aggressively to reduce unemployment if needed — but not at the cost of high inflation.
Bernanke spoke after Fed policymakers ended a two-day meeting by reiterating their plan to keep interest rates near zero through at least late 2014. The officials said the economy is growing moderately and the pace will likely pick up.
But they also cautioned that unemployment won’t fall sharply anytime soon and that risks from Europe’s debt crisis remain.
In a statement, they noted that inflation has risen, mainly because of higher gasoline prices, but said they expect the spike to be temporary.
Since the financial crisis struck, the Fed has pursued two rounds of purchases of Treasury bonds and mortgage-backed securities to try to push down long-term interest rates. The goal has been to encourage borrowing and spending.
Bernanke told reporters that more bond purchases, or other steps by the Fed, are still an option if the economy weakens.
“Those tools remain very much on the table,” Bernanke said.
Its decision to leave its policy unchanged had been widely expected.
David Jones, chief economist at DMJ Advisors, said he thinks the Fed will keep another round of bond buying as an option through the rest of this year. But with the economy slowly improving, Jones said, the Fed is unlikely to implement such a program this year.
Critics have expressed concerns that the central bank has raised the risk of higher inflation with its campaign to push rates down.
The Fed’s decision to keep its current easy-credit stance was approved on a 9-1 vote of the central bank’s policy committee, composed of Fed board members in Washington and five regional bank presidents. As he has at the past two meetings, Jeffrey Lacker, president of the Richmond Fed, opposed the late-2014 target date. The statement said Lacker didn’t think economic conditions warrant a record-low rate late for that long.
What he’s saying
Ben Bernanke on the recovery
ECONOMIC OUTLOOK
“Some of the headwinds that have been affecting our recovery, such as the housing markets, financial stresses, credit tightness, and so on … we hope will be lifting over time.”
THREATS TO GROWTH
“If all the tax increases and spending cuts … which would take place absent any congressional action were to occur … that would be a significant risk to the recovery.”
FRUSTRATIONS
“It’s been quite slow. And as a result, here we are almost three years from the beginning of the expansion, and the unemployment rate is still over 8 percent.”
