Bernanke says Fed may taper QE in 2013 but monetary policy is not on a preset course

Federal Reserve chairman Ben Bernanke has said in prepared testimony that the Fed may taper quantitative easing (QE) - reducing the rate of expansion of the Fed's balance sheet - in 2013, and halt QE altogether around mid-2014.

Crucially, Bernanke said that monetary policy is not on a "preset course":

I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course. On the one hand, if economic conditions were to improve faster than expected, and inflation appeared to be rising decisively back toward our objective, the pace of asset purchases could be reduced somewhat more quickly. On the other hand, if the outlook for employment were to become relatively less favorable, if inflation did not appear to be moving back toward 2 percent, or if financial conditions--which have tightened recently--were judged to be insufficiently accommodative to allow us to attain our mandated objectives, the current pace of purchases could be maintained for longer. Indeed, if needed, the Committee would be prepared to employ all of its tools, including an increase the pace of purchases for a time, to promote a return to maximum employment in a context of price stability.