WASHINGTON (Reuters) - Below are highlights from Federal Reserve Chairman Ben Bernanke’s news conference following the Fed’s policy meeting on Wednesday.
“I have been a longtime proponent of an inflation target. I think that would help anchor inflation expectations, it would make it easier to reach our inflation objective. At the same time it is not at all inconsistent with our employment objective because keeping inflation low and stable and keeping inflation expectations low and stable actually gives the Fed more leeway to respond in the short-term shocks to the economy. So I think it is something that is worth considering. In terms of authorities, I would just say that there are multiple models around the world....
“I don’t think there’s a real barrier to setting a target. However it is very important that first, that we communicate to the public what we are doing...
“We need to make sure that it is well understood both by the public and by Congress that having a target would not mean that we are abandoning the other leg of the dual mandate.
“Under any circumstances it would be important to take the pulse of Congress. We might have the legal authority to do this, but I think we do need some buy-in from the administration and Congress to take that step....There’s nothing imminent, but again we will continue to discuss this and as appropriate we will be consulting about it.”
ON TEMPORARY VS LONGER-LASTING SLOWDOWN
“Part of the slowdown is temporary and part of it may be longer-lasting. We do believe that growth is going to pick up going into 2012 but at a somewhat slower pace from what we had anticipated in April. We don’t have a precise read on why this slower pace of growth is persisting . One way to think about it is that maybe some of the headwinds that have been concerning us — like weakness in the financial sector, problems in the housing sector, balance sheets and deleveraging issues — some of these headwinds may be stronger, more persistent than we thought. I think it is an appropriate balance to attribute the slowdown partly to these identifiable temporary factors but to acknowledge the possibility that some of the slowdown is due to factors which are longer-lived and which will be still operative by next year.”
“As of last August we were essentially missing significantly on both sides of our mandate. Inflation was low and falling and unemployment look like it might be even beginning to rise again. In that case the case for monetary action was pretty clear in my mind. I think we are in a different position today, certainly not where we would like to be but closer to the dual mandate objectives than we were at that time. So, again, the situation is different today than last August but we will continue to monitor the economy and act as needed.”
“With respect to additional asset purchases, we haven’t taken any action, obviously, today. We will be reviewing the outlook going forward. It will be a Committee decision. I think the point I would make though in terms of where we are today versus where we were say in August of last year when I began to talk about asset purchases, is that at that time inflation was very low and falling. Many objective indicators suggested that deflation was a nontrivial risk and I think that the securities purchases have been very successful in eliminating deflation risks.”
“I think the Europeans appreciate the incredible importance of resolving the Greek situation. If there were a failure to resolve that situation it would pose threats to the European financial system, the global financial system, and to European political unity I would conjecture as well. So yes, we did discuss it and it is one of several potential financial risks that we are facing now.
“But again we are mostly just following the situation closely and making sure that as best we can that our own institutions are as well positioned relative to sovereign debt in the so-called peripheral countries.”
“The reduced pace of the recovery partly reflects factors that are likely to be temporary. In particular, consumers’ purchasing power has been damaged by higher food and energy prices and the aftermath of the tragic earthquake and tsunami in Japan has been associated with disruptions in local supply chains, especially in the auto sector. However some moderation in gasoline prices is now a prospect and the effects of the Japanese disaster and manufacturing output are likely to dissipate in coming months. Consequently...the committee expects that the pace of economic recovery will pick up overcoming quarters.”