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Bernanke: Fed could act again to stimulate economy

Bernanke: Fed could act again to stimulate economy

April 25th, 2012 in News

WASHINGTON (AP) - Content for now with the current course, Federal Reserve Chairman Ben Bernanke left open the possibility Wednesday that the Fed will take further action to stimulate the economy and reduce unemployment - but not at the cost of high inflation.

He spoke to reporters after Fed policymakers ended a two-day meeting by sticking to their plan to keep interest rates near zero through at least late 2014. The officials said the economy is growing moderately and that the pace will likely pick up.

But they also cautioned that unemployment won't fall sharply anytime soon and that risks from Europe's debt crisis remain. In a statement, they noted that inflation has risen, mainly because of gasoline prices, and they expect the spike to be temporary.

Since the financial crisis, the Fed has pursued two rounds of bond purchases to try to push down long-term interest rates, with a goal of encouraging borrowing and spending.

Bernanke told reporters that more bond purchases, or other steps by the Fed, are still an option if the economy weakens.

"Those tools remain very much on the table," Bernanke said.

The decision to leave Fed policy unchanged had been widely expected, and reaction in financial markets was muted. The yield on the 10-year Treasury note edged higher, and the dollar rose slightly against other currencies. Stock indexes didn't move much.

David Jones, chief economist at DMJ Advisors, said he thinks the Fed will keep another round of bond buying as an option through the rest of this year. But with the economy slowly improving, Jones said, the Fed is unlikely to implement such a program this year.

Critics have expressed concerns that the central bank has raised the risk of higher inflation with its long-running campaign to keep rates low.