The Federal Reserve yesterday vowed to continue taking aggressive measures to boost growth, as Chairman Ben Bernanke said the "fiscal cliff" battle has already done damage to the economy.
"Clearly the fiscal cliff is having effects on the economy," Bernanke said, noting uncertainty has affected business and consumer confidence in recent weeks.
But Bernanke, who coined the phrase "fiscal cliff" to describe the impact of tax hikes and spending cuts scheduled to hit Jan. 1, held out hope that the crisis will be resolved.
"I'm hoping that Congress will do the right thing on the fiscal cliff," he said. "There is a problem with kicking the can down the road."
If a deal is not reached, Bernanke warned that the Fed doesn't have the tools to contain the resulting damage to the economy.
"We cannot offset the full impact of the fiscal cliff. It's just too big," he said.
Bernanke's comments came after the Fed, in a widely anticipated move, extended a bond-buying plan in an effort to support the still-struggling economy.
Central bankers announced a program to purchase mortgage-backed securities at a rate of $40 billion a month, and buy long-term Treasuries after the current program expires at the end of the year, starting at a $45-billion-a-month pace.
The Fed set an unusually specific goal of keeping a key short-term interest rate near zero until the U.S. unemployment drops below 6.5 percent. The jobless rate now stands at 7.7 percent.
"Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," the Fed said in a statement at the end of its two-day monetary policy meeting.
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