Bernanke: No fixed schedule for slowing bond buys
WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke said Wednesday there is “no fixed schedule” or “magic number” for when the U.S. central bank will start to slow or end its bond purchases.
During a news conference after the meeting, Bernanke said the Fed could still reduce the $85-billion-a-month in bond purchases later this year. But he said that hinges on the economy showing sustained improvement. And he clarified that the program won’t necessarily end when unemployment reaches 7 percent.
“What we will be looking at is the overall labor market situation, including the unemployment rate but other factors as well. There is no magic number,” Bernanke said.
The Fed said after its two-day policy meeting that it will continue to buy bonds at the current pace while it awaits conclusive evidence that the economy is strengthening. The bond purchases are intended to keep long-term borrowing rates low to boost spending and economic growth.
Since the bond purchases began a year ago, the unemployment rate has fallen to 7.3 percent, the lowest since 2008. Yet the rate has dropped in part because many people have stopped looking for work and are no longer counted as unemployed.
Bernanke acknowledged that the drop in the so-called “labor force participation rate” has understated the amount of “true unemployment” in the economy. Still, he says several other measures of the job market show progress.
“Most of the improvement in the unemployment rate — not all, but most — is due to job creation,” he said.
Bernanke continued to dodge all questions about his own future. It is widely expected that he will step down when his current term has chairman ends on Jan. 31. But he has not publicly stated this intention.
“If you will indulge me just a little longer, I prefer not to talk about my plans,” Bernanke told a questioner. But he said he hoped to have information to divulge “soon.”
Former Treasury Secretary Lawrence Summers announced on Sunday he was withdrawing his name from consideration. That has left as the leading contender Fed Vice Chair Janet Yellen. The administration said this week that President Barack Obama intends to nominate a successor this fall.
Bernanke rejected a suggestion that the Fed’s decision not to begin trimming its bond purchases had confused financial markets, which had widely expected a move.
“I don’t recall stating that we would do any particular thing at this meeting,” Bernanke said. “We can’t let market expectations dictate our actions.”