Ben Bernanke said
'headwinds', including government budget cuts, were slowing the US
economy's recovery
Fed chairman Ben Bernanke says:
Stimulus programme isn't a creating 'bubbles' more about that.He said denied his $85bn-a-month stimulus programme was creating new financial bubbles as he updated Congress on his views on the US economic recovery on Wednesday.
Federal Reserve chairman Ben Bernanke denied his $85bn-a-month stimulus programme was creating new financial bubbles as he updated Congress on his views on the US economic recovery on Wednesday.
The Federal Reserve's quantitative easing programme has helped drive US stock markets to record highs even as the wider economy continues to suffer from high levels of unemployment. Asked whether the stimulus programme was creating bubbles similar to the one experienced by the housing market ahead of the recession, Bernanke said "major asset classes, including the stock markets, were "not inconsistent with the fundamentals".
US stock markets rallied Wednesday morning as the Fed chairman made clear he had no intention of cutting short the quantitative easing programme in the near future. The US economy is improving, but "headwinds" including government budget cuts are dragging on the recovery, Bernanke told Congress.
Investors, however, became additional cautious on weekday oncenoon and therefore the markets fell after the discharge of the minutes from the Fed's last meeting showed some committee members were ready to begin curbing the scale of the programme as early as Gregorian calendar month if the recovery continues.
Bernanke warned Washington's deep disbursal cuts were holding back the recovery. "Conditions within the job market have shown some improvement recently," he said. "Despite this improvement, the task market remains weak overall: The pct continues to be well on top of its longer-run traditional level, rates of long state ar traditionally high, and also the labour participation rate has continued to maneuver down. Moreover, nearly eight million folks ar operating half time even supposing they might like full-time work."
Bernanke acknowledging that historically low interest rates and the Fed's huge government bond buying programme had costs but he said "a premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery."
