JEKYLL ISLAND, Georgia (Reuters) - The Federal Reserve is trying to help a weak economy with its new $600 billion bond purchase plan, not jump-start inflation, central bank chairman Ben Bernanke said on Saturday.
“We’re not in the business of trying to create inflation, our purpose is to provide additional stimulus to help the economy recover and to avoid potentially additional disinflation, which I think we all agree could also be worrisome,” Bernanke said.
He was speaking alongside former top Fed officials Alan Greenspan and Gerald Corrigan at an event commemorating the 100th anniversary of a meeting on Jekyll Island that led to the creation of the U.S. central bank system.
With an economy that is growing at just a 2 percent annualized clip and a jobless rate that remains stagnant at 9.6 percent, the Fed this week decided to provide a fresh, if controversial, push to the anemic recovery.
Bernanke sought to quell controversy about the Fed’s unconventional approach to policy, saying asset purchases would work to boost growth in much the same way that pushing down interest rates usually does.
Having already brought rates near zero and bought some $1.7 trillion in government and mortgage bonds during the financial crisis, the Fed last week launched a new easing push that was welcomed in financial markets but is seen as controversial by some economists and politicians.
Opponents argue the policy’s risks, which include possible asset bubbles and future inflation, are not worth the benefits.
But Bernanke said the Fed, bound by a dual mandate for low and stable prices and firm employment, has a duty to provide any support for the economy that it can at a time when it appears to be undershooting both of its goals.
“We are committed to our price stability objective. I have rejected any notion that we are going to raise inflation to a supra-normal level,” Bernanke said.
“We’ve had a very significant disinflation since the beginning of the crisis,” he said. “We should not be satisfied with a situation where we have both a large amount of slack on the employment side and inflation which is below our generally agreed upon level and seems to be declining over time. That’s a signal that more should be done and that was the motivation for the action taken earlier this week.”