Fed chair says time to cut trillion-dollar budget deficit
TEXT OF STORY
Bob Moon: It’s not often the head of the Federal Reserve agrees to walk the media high wire and take questions from reporters. Today, Ben Bernanke stood by the central bank’s policy of priming the economy with easy money. He also cautioned anew that it will be “several years” before unemployment comes down to normal levels.
Still, Marketplace’s John Dimsdale reports the Fed boss insists his policies are working.
John Dimsdale: Bernanke said he sees no reason to abandon the Fed’s economic stimulus plan, which is injecting $600 billion into economy. And part of the proof that it’s working, he says, is the rising stock market.
Ben Bernanke: As the markets see the stronger economy materializing, that’s incorporated into expectations about future profits and future economic activity. And that causes the market to rise as well. So it’s a virtuous circle in that respect.
Some economists criticize the Fed’s easy money policy as a formula for inflation. But Bernanke said inflation is low. And since unemployment remains unacceptably high, the stimulus should continue. He promised to fully inform the public of Fed deliberations, saying he’s even considering regular press conferences. With the Fed playing a central role in fixing the financial crisis, some in Congress have been pushing for more oversight.
Kenneth Rogoff: The Fed was used as a back door way to do huge, huge fiscal policy.
Kenneth Rogoff is an economics professor at Harvard.
Rogoff: Members of Congress have figured this out. And they’re starting to want to know how to rein it in.
But Bernanke said it’s Congress’s act that needs to be cleaned up, not the Fed’s. He said the recovery will falter if Congress doesn’t cut the deficit.
Bernanke: The question will be do we have the political capacity, the political will to do it and I think that’s what the markets will be following.
In Washington, I’m John Dimsdale for Marketplace.
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