“The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters,” Bernanke said today in remarks prepared for a speech in Philadelphia. “Of course, if the experience of the past few years teaches us anything, it is that we should be cautious in our forecasts.”
Bernanke used his remarks to reflect on his eight years as leader of the U.S. central bank, steering the economy through the most severe economic and financial crisis since the 1930s. Policy makers last month trimmed the Fed’s monthly bond buying to $75 billion from $85 billion, taking a first step toward unwinding unprecedented stimulus engineered by Bernanke to put millions of unemployed Americans back to work.
He said the decision to taper bond purchases “did not indicate any diminution of its commitment to maintain a highly accommodative monetary policy for as long as needed.”
Bernanke cited payroll employment rising by 7.5 million since 2010 and the economy growing in 16 of the 17 quarters after the recession ended as evidence the Fed’s policies, which also included providing more information on the likely future path of interest rates, have succeeded.
“The economy has made considerable progress since the recovery officially began some four and a half years ago,” the 60-year-old former Princeton University professor said to the annual meeting of the American Economic Association. His tenure ends Jan. 31.
“When the economy was in free fall in late 2008 and early 2009, such improvement was far from certain, as indicated at the time by stock prices that were nearly 60 percent below current levels and very wide credit spreads,” Bernanke said.
The Standard & Poor’s 500 Index, which hit a record last month and rose 30 percent last year, was up 0.2 percent to 1,834.69 at 3:02 p.m. in New York. The yield on the benchmark 10-year Treasury note rose 0.01 percentage point to 3 percent.
The Fed’s bond buying helped reduce unemployment to a five- year low of 7 percent in November while swelling the Fed’s balance sheet to $4.02 trillion. Policy makers, including Philadelphia Fed President Charles Plosser, have said the purchases raise the long-term risk of inflation and may create financial market distortions such as asset-price bubbles.