* Bernanke says won't see 6 percent jobless rate until 2016
* Fed chief tries to calm concerns over risks of policies
* "Significant majority" support policy course
* One Fed hawk, Fisher, calls for immediate tapering of QE
By Pedro Nicolaci da Costa and Jonathan Spicer
WASHINGTON/NEW YORK, Feb 27 The U.S. jobless
rate is unlikely to reach more normal levels for several years,
Federal Reserve Chairman Ben Bernanke said on Wednesday as he
again defended the central bank's forceful easing of monetary
Appearing before a congressional panel for a second straight
day, Bernanke downplayed signs of internal divisions at the Fed,
saying the policy of quantitative easing, or QE, has the support
of a "significant majority" of top central bank officials.
One lawmaker asked Bernanke when the economy might produce
enough jobs to bring the unemployment rate, currently at 7.9
percent, down to 6 percent - the top of the Fed's long-term
"A reasonable guess for 6 percent would be around 2016,
about three more years," Bernanke told the House of
Representatives Financial Services Committee.
Moreover, as he had in an appearance before the Senate
Banking Committee on Tuesday, the Fed chairman countered the
notion that the Fed's loose monetary stance might be fueling
asset bubbles or inflation.
"It's our view that there's still a good bit of slack in the
economy. I don't think the economy is overheating," he said.
Financial markets were again encouraged by Bernanke's
remarks, with stocks rallying for a second day on the Fed
chief's signal of continued stimulus combined with enthusiasm
over strong figures on business investment plans.
"He is going to be refilling the punchbowl for a very long
time," said Keith Bliss, senior vice-president at Cuttone & Co
in New York.
In response to the financial crisis and deep recession of
2007-2009, the Fed slashed official borrowing costs to
effectively zero and bought more than $2.5 trillion in mortgage
and Treasury securities to keep long-term rates low.
It is currently buying $45 billion in Treasuries and $40
billion in mortgage bonds per month, a policy Fed officials
backed in an 11-1 vote in January. However, minutes of that
meeting released last week showed many officials had concerns
over the risks presented by the central bank's policy course.
Dallas Fed President Richard Fisher, who is among the
minority of so-called hawks at the central bank, said later on
Wednesday that he would like the Fed to immediately taper the
purchases because the U.S. housing market is on sounder footing.
"The fact that the housing market gears have now begun to
mesh is why I believe we are running the risk of overkill by
continuing our mortgage-backed securities purchase program at
the current pace, and I have suggested that we begin tapering
those purchases," Fisher said at Columbia University.
"Personally I would begin tapering Treasuries as well," he
later told reporters. "I would like to start now. I just don't
think the benefits are worth the costs."
But most Fed officials are eager to continue the
extraordinarily easy policies given the high jobless rate and
the fact that inflation is below their 2 percent target, and
they do not want to derail a recovery that has faltered in each
of the last three years.
Bernanke argued the Fed's policy easing deserves at least
some credit for the ongoing economic recovery, even if growth
remains fragile and vulnerable to looming short-run spending
cuts from the U.S. government.
Indeed, he argued that current plans for abrupt short-term
deficit reduction could be counterproductive, even for the
purposes of reducing government debt levels.
"I'm still concerned about the short-run impact on jobs," he
said. "(You) don't get as much benefit as you think because if
you slow the economy that hurts your revenues and that means
your deficit reduction is not as big as you think it is."
A number Republicans on the House committee said they also
were concerned about the Fed's actions.
"For diminishing marginal benefits, the Federal Reserve's
unconventional strategy creates considerable risks," said
Representative Jeb Hensarling, the panel's chairman. "If the
(Fed's) balance sheet is not unwound at the right time and at
the right pace, we could be looking at another deep recession,
soaring inflation or skyrocketing interest rates."
Bernanke tried to soothe such worries, expressed by a number
of lawmakers, that the central bank was so far into uncharted
policy territory that an exit could be problematic.
Admitting the Fed would face an unprecedented task, Bernanke
nonetheless said the central bank has the right tools to exit
when the time comes, adding that those measures have been tested
and used in other countries.