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U.S. to extend relaxed monetary policy for economic recovery, says Bernanke

Published: 21/07/2009 05:00

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The U.S. relaxed monetary policy will extend longer to foster the economic recovery, Federal Reserve Chairman Ben Bernanke said on Tuesday.

Federal Reserve Board Chairman Ben Bernanke listens to opening statements before testifying before the House Financial Services Committee on Capitol Hill in Washington July 21, 2009. (Xinhua/Reuters Photo)

“In light of the substantial economic slack and limited inflation pressures, monetary policy remains focused on fostering economic recovery,” Bernanke said in his semiannual monetary policy report to the Congress, “a highly accommodative stance of monetary policy will be appropriate for an extended period.”

According to the report, positive signs have shown during the first half of 2009.

“Better conditions in financial markets have been accompanied by some improvement in economic prospects … Although the recession in the rest of the world led to a steep drop in the demand for

U.S. exports, this drag on our economy also appears to be waning, as many of our trading partners are also seeing signs of stabilization,” he said.

As the economy is turning better, more and more people are considering when the Fed should exit its nearly zero interest rate policy in order not to cause high inflation pressure to the economy.

Bernanke said that despite the positive signs, the rate of job loss remains high and the unemployment rate has continued its steep rise. Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending. The possibility that the recent stabilization in household spending will prove transient is an important downside risk to the outlook.

“It is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation,” he said.

To promote economic recovery and foster price stability, the Federal Open Market Committee, last year brought its target for the federal funds rate to a historically low range of 0 to 1/4 percent, where it remains today.

VietNamNet/Xinhuanet

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