WASHINGTON Federal Reserve Chairman Ben Bernanke on Thursday gave a full-throated defense against criticism the U.S. central bank's controversial bond-buying program is debasing the dollar, saying a vigorous U.S. recovery is central to global economic health.
"The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States," Bernanke said in comments prepared for delivery to a conference at the European Central Bank in Frankfurt.
A text of Bernanke's remarks -- his first public statement since the Fed's November 3 decision to buy $600 billion in longer-term Treasuries through the middle of 2011 in order to spur growth -- was released ahead of his scheduled Friday appearance.
The Fed's renewal of large-scale asset purchases generated outrage from global trading partners who charged the United States with fostering competitive currency devaluation. German Finance Minister Wolfgang Schaeuble has called the policy "clueless."
In the United States, Republican politicians and economists charge the Fed with sowing the seeds of future inflation, weakening the dollar, and snatching the job of stimulating the economy away from fiscal authorities.
Bernanke said sluggish growth, declines in inflation, and an unemployment rate that has hovered near 10 percent for months convinced U.S. policy makers they needed to act.
"On its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years," he said. "As a society, we should find that unacceptable."
The Fed is charged with a dual mandate of both supporting full employment and keeping inflation at low and steady levels.
Bernanke also said a fiscal program that combines near-term measures to enhance growth and steps to address long-range deficits would be an important complement to Fed policies.
The Fed chief said much of the recent weakness in the dollar reflects an unwinding of the increases that were notched as investors fled to the safety of the greenback during the European sovereign debt crisis in the spring.
Many emerging economies have worried that volatile investment inflows could be destabilizing. Bernanke said the failure of some emerging market economies with trade surpluses to allow their currencies to appreciate was aggravating that problem.
"Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals," he said.
Describing a "two-speed" global recovery, Bernanke said emerging markets were returning to pre-crisis levels of growth while advanced economies are lagging. It is necessary for the more developed economies to maintain accommodative policies to support a durable recovery, he said.
(Reporting by Mark Felsenthal; Editing by Leslie Adler)