Bernanke: Low Interest-rate-policies Benefit Trade
During a question-and-answer session after the speech, Bernanke neither addressed Weber's concerns directly nor offered any hints about the direction of U.S. interest rates.
But former U.S. Treasury Secretary Larry Summers, another member of the panel and a supporter of the Fed's policies, said the biggest threats to the economy now are high unemployment.
"The risks of stagnation are an inherently greater concern than inflation," Summers said.
The Fed's policies are aimed at lowering unemployment, which has fallen to 7.7 percent but is still above healthy levels.After its two-day meeting last week, the Fed said it would stick with its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent. Bernanke told reporters that the Fed saw the 6.5 percent unemployment level as a threshold and not a "trigger," for a possible rate increase. The Fed also said it would keep buying $85 billion a month in bonds to keep long-term borrowing costs. Lower rates encourage more borrowing and spending, which leads to faster growth and lower unemployment. Bernanke told reporters at a news conference that the Fed might vary the size of its monthly purchases depending on whether the job market is improving and by how much. In its policy statement, the Fed noted that the U.S. job market has improved, consumer spending and business investment have increased and the housing market has strengthened. But in an updated economic forecast also released last week, the Fed said it still did not expect unemployment to reach 6.5 percent until 2015. The Fed's economic projections showed that 13 Fed officials still think the first Fed rate hike will not occur until 2015. That was the same number as in December. One Fed official thinks the first boost in the short-term lending rate won't occur until 2016.
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