Tags: Bernanke | Fed | growth | policy

Bernanke Holds Last Press Conference

By    |   Thursday, 26 Dec 2013 06:53 AM

On Dec. 18, the Federal Open Market Committee (FOMC) finished its last meeting of the year, Ben Bernanke's last as chairman and issued a communique that it will begin, very tentatively, to taper its purchases of Treasury and mortgage-backed securities by only $5 billion per month for each category. It tempered even that action by promising to maintain its accommodative interest rate policy through at least 2016, even if the unemployment rate falls to 6.5 percent or lower. Bernanke has said all along that this number was a threshold, not a trigger, for cutting back support for the securities market.

After the meeting concluded, Bernanke met for an hour with the financial press for the last time as chairman. Such press conferences have been part of the Fed's strategy of improved communication in order to help keep markets abreast of what to expect through the device called "enhanced forward guidance." During his opening statement, Bernanke stressed that the pace of asset purchases will be reduced at a "modest" pace, which appears to be an understatement, and that the economy "has much farther to travel" before the accommodative policy can be ended, so that it would be kept in place "well past the time" when unemployment falls to at least 6.5 percent.

This would especially be true if the inflation rate continues to remain below 2 percent. He added that as the unemployment rate falls, the Fed will look to additional indicators of conditions in labor markets to inform its policy.

Bernanke shared some of the forecasts the FOMC used in making its tapering decision. GDP growth is estimated at 2.2 percent in 2014, 2.8 percent in 2015 and headed toward 3.2 percent in 2016. The Committee estimates that the Federal Funds Rate (FFR) will be raised to 0.75 percent in 2015 and 1.75 percent in 2016. He indicated that the first increase in the FFR would come near the end of 2015.

After concluding his statement, Bernanke patiently answered questions for the rest of the hour, and it was evident that he enjoys this give and take and has developed a rapport with the financial beat reporters. The questions began as an attempt to get Bernanke to be more specific as to the nuances of the policy, sometimes asking him to repeat points he had already made. As the press conference wore on, the theme of the questions changed to demands to know why the Fed isn't being more aggressive in boosting the performance of the economy. This indicates that the Fed has raised expectations as to its ability and willingness to take extraordinary action in response to any untoward economic indicator.

As the press conference neared its close, a reporter asked Bernanke whether he plans to return to South Carolina. Bernanke responded that when he returns to Carolina, it will be to North Carolina, but for the time being, his family will remain in Washington.

In response to one of the questions as to whether the Fed could take more direct action to stimulate the economy, Bernanke questioned whether the Fed has the legal authority to act, to which the reporter shot back that the Fed should ask for it. I cynically expect that when the time comes to support important clients, lack of authority will not stop the Fed.

(Archived video can be found here.)

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
Robert-Feinberg
On Dec. 18, the Federal Open Market Committee (FOMC) finished its last meeting of the year, Ben Bernanke's last as chairman and issued a communique that it will begin, very tentatively, to taper its purchases of Treasury and mortgage-backed securities by only $5 billion per month for each category.
Bernanke,Fed,growth,policy
558
2013-53-26
Thursday, 26 Dec 2013 06:53 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved