Fed’s Bernanke: Restricting accommodative monetary policy could harm economy

Ben Bernanke

Ben Bernanke

Federal Reserve Chairman Ben Bernanke said on Wednesday that restricting the central bank’s accommodative monetary policy by raising interest rates or slowing its bond-buying program may have a negative impact on the economy, if any at all.

Bernanke’s statement echoes comments by New York Fed President William Dudley and St. Louis Fed President James Bullard, both of whom have said the economy needs to recover more before they would endorse cutting back the Fed’s bond-buying program.

During the hearing before the Joint Economic Committee, Bernanke said the Fed is torn between concerns over maintaining low interest rates for too long and easing its policy stance too soon, both of which could jolt the economy.

“The Fed officials clearly want to reassure financial markets that they are sticking to the stated policy, which is not to exit from quantitative easing until inflation and unemployment thresholds are reached,” David Carrier, the chief economist for the National Association of Federal Credit Unions, said.

Carrier said the last meeting of the Federal Open Market Committee revealed the number of different views about whether the Fed should adjust its asset-purchasing program sooner than planned.

The committee will hold its next policy meeting on June 18 and June 19.

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