Ben’s last rally

The Fed’s board members now think that unemployment will drop slightly more in 2014, to as low as 6.3 per cent.

Bernanke expects that tapering will continue in “moderate steps” through most of next year”.

The rate-setting Federal Open Market Committee (FOMC) now expects that low rates will remain in place until unemployment falls “well past” 6.5 per cent. Bernanke raised the prospect that the committee would focus more on other labour market indicators, adding the potential for more discretion.

The Federal Reserve has contemplated a programme along the lines of the Bank of England’s Funding for Lending, but Bernanke believes that US banks “are flush with liquidity,” unlike their counterparts in the UK and the Eurozone.

Bernanke insisted that the Fed was “not doing less” by tapering, reiterating his long-argued point that a reduction in asset purchases did not necessarily mean tighter policy.

The statement also stressed that both employment and inflation, the two wings of the Fed’s dual mandate, are below levels which the central bank is comfortable with.

The outgoing chairman was not glowing about recoveries in the world’s other advanced economies: “The US recovery has been better than most. It’s not been good, it’s not been satisfactory… but given all the things that we’ve faced, in retrospect it’s not shocking that the recovery has been somewhat tepid”.

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