WASHINGTON, July 17, 2013 (AFP) – US Federal Reserve Chairman Ben Bernanke reiterated Wednesday that the Fed stimulus could be wound up next year if economic growth remains steady as forecast. The surge in rates, economists worry, could itself slow the recovery by slowing demand in the recovering housing sector, which has become a key contributor to growth.
Bernanke said the federal funds rate, now at 0-0.25 percent, would stay low “at least as long as” unemployment remains above 6.5 percent and inflation remains tame at 2 percent or below.
He stressed that even those numbers “are thresholds, not triggers” that would prod the FOMC to weigh changes to monetary policy, and not automatically result in a rate hike. But Bernanke warned that government spending cuts continue to threaten growth and that tapering the big bond-purchase program is “by no means” a “preset course”.
In prepared testimony to Congress, Bernanke stressed that the end to the $85 billion-a-month quantitative easing (QE) program did not mean the Fed was ready to begin tightening monetary policy with interest-rate hikes.
With unemployment still high and falling slowly and inflation very low, he said, “a highly