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Bernanke Reconfirms Policy to Keep Rates Low

Posted By RVBusiness On February 7, 2012 @ 3:39 pm In Breaking News | No Comments

Ben Bernanke today (Feb. 7) reiterated the Federal Reserve’s plan to hold interest rates near record lows until at least late 2014, according to an Associated Press report.

The Fed chairman stuck with the three-year time line at a Senate Budget Committee hearing, even after the government last week reported a surge in January hiring that drove the unemployment rate down to a three-year low.

None of the senators asked Bernanke whether the encouraging job figures were reason enough for the Fed to rethink holding interest rates low for that long. And Bernanke didn’t tout the hiring data during the two-hour hearing.

If anything, Bernanke maintained the Fed’s position: the economy is improving at a frustratingly slow pace and that low rates are necessary to boost growth.

The Fed has kept its benchmark interest rate near zero for the past three years. In its policy statement in January, the Fed said it would probably not increase that rate until late 2014 at the earliest — a year and a half later than it had previously said.

During the hearing, Republicans repeated familiar concerns. They said keeping rates down could raise the risk of inflation. And low rates punish traditional savers. Bernanke said Fed officials were aware of the risks and were closely monitoring inflation, which he said was low and falling.

The Fed last month set an annual inflation target of 2%. Inflation in October-December quarter was below that target.

“Given that inflation is close to target, I don’t think we would be doing radically different things at this point in time with a single mandate,” Bernanke said.

 

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