Bernanke cautious on recovery

THE Federal Reserve is in no hurry to tighten monetary policy because the US economy is still too fragile, Ben Bernanke said yesterday.<br /><br />Delivering his twice-yearly testimonial to the US Congress, the Fed chairman said unemployment was set to remain high until 2011 so it was not the right time for &ldquo;exit strategies&rdquo; such as raising interest rates or withdrawing the huge stimulus used to boost the American economy.<br /><br />&ldquo;In light of the substantial economic slack and limited inflation pressures, monetary policy remains focused on fostering economic recovery,&rdquo; he said.<br /><br />&ldquo;The Federal Open Market Committee believes that a highly accommodative stance of monetary policy will be appropriate for an extended period.&rdquo;<br /><br />In a bid to soothe market worries about loose monetary policy causing inflation in the medium-term, he stressed that the Fed would eventually move to withdraw money.<br /><br />&ldquo;We...believe that 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that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed,&rdquo; he said.<br /><br />Bernanke said the Fed could raise the interest paid on reserve balances to help set a floor on interest rates, or even sell its long-term securities.