Bernanke says Fed's easy policy benefits world economy

WASHINGTON Mon Mar 25, 2013 3:42pm EDT

Federal Reserve Board Chairman Ben Bernanke pauses while answering questions at a news conference at the Federal Reserve offices in Washington, March 20, 2013. REUTERS/Jonathan Ernst

Federal Reserve Board Chairman Ben Bernanke pauses while answering questions at a news conference at the Federal Reserve offices in Washington, March 20, 2013.

Credit: Reuters/Jonathan Ernst

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WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke on Monday defended the central bank's aggressive easing of monetary policy, saying while it was aimed at bolstering the economic recovery, it was helping other countries as well.

The Fed's asset-purchase programs, aimed at keeping long-term borrowing costs down and spurring investment, have been criticized overseas for their adverse impact on emerging market currencies.

But the Fed chief, fresh from a grilling from Congress on the potential domestic risks of his quantitative easing measures, countered the rhetoric about "currency wars," though he did not use the term specifically.

In prepared remarks to a group of academics in London, Bernanke said the integrated nature of the global economy meant the whole world benefits from a sturdier outlook.

"Because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not ‘beggar-thy-neighbor' but rather are positive-sum, ‘enrich-thy-neighbor' actions," he said.

In response to a deep financial crisis and recession, and subsequent weak recovery, the Fed not only lowered overnight interest rates to effectively zero but bought more than $2.5 trillion in mortgage and Treasury securities.

Domestic critics say the central bank's vastly expanded balance sheet, now topping $3.1 trillion, risks future inflation. But Bernanke has noted that inflation is forecast to remain at or below the central bank's 2 percent target for the foreseeable future.

Economic growth, meanwhile, remains more of a question mark, particularly with the combination of sharp spending cuts at home and turbulence in European financial markets casting a pall over some better recent U.S. economic data.

Analysts expect gross domestic product will expand around 2 percent this year, while Fed officials see 2013 growth between 2.3 percent and 2.7 percent.

"The distinction between monetary policies aimed at domestic objectives and trade-diverting exchange rate devaluations and other protectionist measures is critical," Bernanke said.

(Editing by Neil Stempleman)

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Comments (4)
OneOfTheSheep wrote:
So now the United States can assure world prosperity with it’s printing presses, and there will never be a day of reckoning for Americans? Who knew?

And I thought academia was the only “industry” that lives in an alternate universe intellectually insulated from the real one.

Mar 25, 2013 4:12pm EDT  --  Report as abuse
Harry079 wrote:
“Bernanke says Fed’s easy policy benefits world economy”

I can only think of a few Countries where that might be true.

China, Mexico, Canada.

Mar 25, 2013 4:28pm EDT  --  Report as abuse
jscott418 wrote:
Does this guy ever read or watch the news? The World economy’s are not doing so great. All of Europe is in recession, China is slowing down and Japan has had its own money printing for a decade without much help to their economy. Seriously I cannot believe believes the stuff he is saying. Greenspan used to say the same stuff. But finally admitted a few years ago that his views and his action were not without major flaws. Bernanke is basically following Greenspans admitted mistakes.

Mar 25, 2013 9:37pm EDT  --  Report as abuse
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