U.S. Federal Reserve chairman Ben Bernanke on
Wednesday rejected speculation that he planned an abrupt end to his
policy of pumping an extra $85 billion a month into the U.S.
Although the economy is growing, it remains hampered by high unemployment and government spending cuts, Bernanke said in testimony prepared for a hearing at the Joint Economic Committee of Congress in Washington. Raising interest rates or reducing asset purchases too soon would endanger the recovery, he added.
"A premature tightening of monetary policy could lead interest rates to rise temporarily, but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," Bernanke said.
Prior to Bernanke's testimony before the committee there had been speculation about whether the Fed was preparing to tighten its current monetary policy.
The Fed's monetary policy is known as quantitative easing. A third round began in September and was increased in December to 85 billion dollars a month. Bernanke said the policy had provided significant benefits.
The aggressive economic stimulus is an effort to spur growth and reduce an unemployment rate that currently stands at 7.5 per cent.
While the labour market has shown some improvement, the Fed chairman said "high rates of unemployment and underemployment are extraordinarily costly."
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