Fed stands ready to deliver QE3 if recovery stalls, Bernanke says

 
Julian Harris
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THE FEDERAL Reserve “would not hesitate” to kick off yet another spell of monetary stimulus if it thought the US recovery required more assistance, its chairman Ben Bernanke said last night.

“We remain entirely prepared to take additional balance sheet actions if necessary to achieve our objectives,” he told reporters in Washington DC. “So those tools remain very much on the table”.

The Fed decided to continue with its current policy at April’s meeting, with Bernanke supporting the Fed’s stance of keeping interest rates at their historic low while continuing to purchase long term assets as part of its scheme coined Operation Twist.

“We see monetary policy as being approximately in the right place at this point,” Bernanke said. “That doesn’t mean we might not take further action, we are certainly prepared to take further action but for the time being it appears that we are more or less in the right place.”

The chairman, often seen as being towards the dovish side of the Fed’s thinking, said that inflation had been temporarily hit by petrol prices and “ought to moderate to about two per cent later this year”.

“Our intention is to maintain a highly accommodative stance on policy for the foreseeable future, and we remain able and willing to take further action if necessary,” Bernanke said.

“Four of the most hawkish members – Plosser, Kocherlakota, Bullard and Fisher – have no vote this year,” noted Ian Shepherdson of High Frequency Economics.