By Jonathan Spicer and Jason Lange
WASHINGTON Jan 16 The U.S. Federal Reserve
should give the economy the stimulus it needs despite "credible"
worries that its massive bond-buying program could destabilize
the financial system, Fed Chairman Ben Bernanke said on
In his last planned public remarks as head of the central
bank, Bernanke said concern about the potential harm to
financial stability is the only risk from unconventional
monetary policies "that I find personally credible."
But, he added "at this point we don't think that, and I
think I can speak for my colleagues on this, we don't think that
financial stability concerns should at this point detract from
the need for monetary policy accommodation, which we are
continuing to provide," Bernanke said.
During his tenure, Bernanke pushed the Fed far into
unconventional territory, not only slashing short-term interest
rates to zero and keeping them there since December 2008, but
providing long-term "forward guidance" assuring investors the
Fed would keep interest rates low for a long time to come.
In a second unprecedented move, he quadrupled the Fed's
balance sheet to $4 trillion through three rounds of bond-buying
aimed at lowering long-term rates and spurring hiring.
"I do think by the way that they both have been helpful,"
Bernanke said at a Brookings Institution event. And neither, he
said, have delivered the potential costs that many warned they
would, including unbridled inflation.
Inflation, by the Fed's preferred gauge, has risen just 1.1
percent in the past 12 months, well below the Fed's 2-percent
Janet Yellen, currently Fed vice chair, will take the reins
as Fed chair on Feb. 1, just after the Fed's first
policy-setting meeting of the year.
Last month, the Fed took a first step toward dialing down
its massive stimulus with a decision to reduce monthly purchases
of Treasuries and mortgage-backed securities to $75 billion from
$85 billion a month.
The Fed will probably phase the program out entirely late in
the year, Bernanke said at the time.
He also told investors that the Fed was nowhere near to
tightening policy, saying the U.S. central bank would keep rates
near zero until "well past the time" that unemployment falls to
6.5 percent, especially if inflation continues to linger below
the Fed's 2-percent target.
Unemployment fell to 6.7 percent in December.