Federal Reserve Chairman Ben Bernanke said
Monday the policies he has deployed to improve the US economy haven't
caused worries over inflation.
Five years of low interest rate policies "have not led to
increased inflation," Bernanke said in a speech to the Economic Club
of Indiana. He added that public's expectations for price gains
"remain quite stable" and the Federal Reserve has the necessary tools
to tighten its policies when needed to prevent "inflationary
pressures down the road."
The inflation rate in the US has been stable at about 2 per cent
since 2008 despite low interest rates. That is under the level that
the Fed considers critical.
Bernanke also defended the expansive monetary policy of
quantitative easing as unavoidable and he pledged to uphold it even
after the US economy gains strength.
"We expect that a highly accommodative stance of monetary policy
will remain appropriate for a considerable time after the economy
strengthens," Bernanke said in his speech in Indianapolis.
The recession destroyed many jobs, paralyzed growth and caused
sharp reductions in real estate values and the value of companies, he
said. He acknowledged that low interest rates were a problem for
savers, but it said it was more important now to stimulate the
economy.
The Fed extended its plan to keep interest rates at around zero
from the end 2014 to the middle of 2015. Bernanke said that didn't
mean the Fed expected the economy to be weak through that year.
Bernanke announced the latest round of quantitative easing on
September 13 when he said the Fed would expand its holdings of
long-term securities by buying up an additional 40 billion dollars a
month of mortgage-backed securities at least until there was
sustained improvement in unemployment.
The new programme, called QE3, was the third round of quantitative
easing by the Federal Reserve since 2008, when the US was dipping
into recession.
