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Bernanke makes strong defense of Fed rate policies

October 2, 2012 • Business


FILE-In this Thursday, Sept. 13, 2012, file photo, Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington. Chairman Ben Bernanke is offering a sharp defense Monday, Oct. 1, 2012, of the Federal Reserve’s bold policies to stimulate the weak economy, while cautioning Congress to respect its private discussions. Bernanke says the Fed needs to drive down borrowing rates low because the economy isn’t growing fast enough to reduce high unemployment. The unemployment rate is 8.1 percent. (AP Photo/Manuel Balce Ceneta, File)

WASHINGTON (AP) — Chairman Ben Bernanke offered a wide-ranging defense Monday of the Federal Reserve’s aggressive policies to stimulate the still-weak economy.

The Fed needs to drive down long-term borrowing rates because the economy isn’t growing fast enough to reduce high unemployment, Bernanke said in a speech to the Economic Club of Indiana. The unemployment rate is 8.1 percent.

Low rates could also help shrink the federal budget deficit by easing the government’s borrowing costs and generating tax revenue from stronger growth, Bernanke argued.

The chairman cautioned Congress against adopting a law that would allow it to monitor the Fed’s interest-rate discussions. The House has passed legislation to broaden Congress’ investigative authority over the Fed — authority that would include a review of interest-rate policymaking. The Senate hasn’t adopted the bill.

Bernanke warned that such a step would improperly inject political pressure into the Fed’s private deliberations and affect the officials’ decisions.

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