Bernanke defended the programs in his remarks today, saying that “for the most part” academic research supports the conclusion that bond purchases and clearer communication from the Fed have “helped promote the recovery.”
Under Bernanke, the Fed began publishing its economic forecasts more frequently, established explicit goals for inflation and unemployment, released projections of future interest rates and began holding quarterly press conferences. Bernanke said the steps have made Fed policy effective and are important for “supporting the institution’s democratic legitimacy.”
At the same time, Bernanke sought to prevent Congress from allowing audits of the central bank’s monetary-policy decision making, saying that such audits could infringe the Fed’s independence. The Fed’s financial books are audited.
The Federal Open Market Committee, scheduled to meet Jan. 28-29, will probably reduce its purchases in $10 billion increments over the next seven meetings before ending them in December, according to a Bloomberg News survey of economists after the FOMC announced its tapering on Dec. 18.
Recent economic reports have affirmed Bernanke’s comment at a Dec. 18 news conference that “the economy is continuing to make progress.”
Manufacturing grew last month at the second-fastest pace in more than two years, fueled by a gain in orders that will help propel the expansion, according to a report yesterday from the Institute for Supply Management.
Outlays for construction projects climbed in November to the highest level since March 2009 as homebuilding and non- residential spending made up for government cutbacks, according to data from the Commerce Department.
U.S. house prices rose in October from a year ago by the most in more than seven years, according to the S&P/Case-Shiller index of property prices in 20 cities. All 20 cities in the index showed a year-over-year gain, led by a 27.1 percent advance in Las Vegas.
The Fed has said it will buy bonds until the outlook for the labor market has “improved substantially.” Bernanke told reporters on Dec. 18 the program was on its way to meeting that test, noting “meaningful cumulative progress” since the start of a third round of asset purchases in Sept. 2012.
The central bank coupled its decision to taper with a stronger commitment to maintaining an accommodative policy. The benchmark interest rate will probably remain low “well past the time that the unemployment rate declines below 6.5 percent,” especially if projected inflation continues to run below the Fed’s 2 percent goal, the FOMC said.
Bernanke, a Great Depression scholar, served on President George W. Bush’s Council of Economic Advisers. He didn’t elaborate on Dec. 18 when asked about his plans after leaving the Fed, other than to say that he and his wife “will stay in Washington for a bit of time.”
Fed Vice Chairman Janet Yellen has been nominated to succeed Bernanke. The Senate vote on her nomination is scheduled for Jan. 6.
Yellen, an architect of the Fed stimulus programs, said in her Nov. 14 confirmation hearing that she’ll maintain current policies until a “strong recovery” permits the bank to scale back monetary accommodation.