See, "Fed Affirms Easy-Money Tilt: Bernanke Says Retreat From Bond Buying Separate From Decision on Raising Rates(via Google):
Federal Reserve Chairman Ben Bernanke sought to reassure jittery markets that while the central bank could start winding down its $85 billion-a-month bond-buying program later this year, Fed officials aren't abandoning their broader commitment to easy-money policies.Sounds like he's having a hard time cutting the cord, actually. Read the whole thing at that top link.
"You can only conclude that highly accommodative monetary policy for the foreseeable future is what's needed in the U.S. economy," he said Wednesday at a conference held by the National Bureau of Economic Research, citing the high unemployment rate, low inflation and "quite restrictive" fiscal policy. He said he expects the Fed won't raise short-term rates for some time after the unemployment rate hits 6.5%, which would be more than a full percentage point lower than its current level.
The remarks Wednesday came a few hours after minutes of the Fed's June policy meeting showed officials deeply divided over when to start unwinding the bond-buying program. About half the officials walked into the meeting thinking the central bank might end the program altogether by the end of the year, the minutes showed.
As discussions proceeded over two days of talks, a number of officials worried about locking themselves into a position and some wanted more information about the economy before laying out a plan to start reducing the bond purchases. A few were concerned that inflation was getting so low that pulling back the program might be unwarranted.
The minutes also showed that Fed officials appear largely in agreement that their decision on the bond program is separate and distinct from their decision-making on raising short-term rates, which have hovered near zero since late 2008. "Many members indicated that decisions about the pace and composition of asset purchases were distinct from decisions about the appropriate level of the federal funds rate," and that rates were likely to stay low for a considerable time after the bond program ends, the minutes said.
The disagreement revealed in the minutes was met Wednesday with muted reaction from investors, perhaps showing that Fed officials' postmeeting remarks aimed at clarifying the central bank's thinking has been successful. U.S. stocks initially rebounded from slight losses after the 2 p.m. release of the minutes. The Dow Jones Industrial Average ended the day down 8.68 points, or 0.1%, at 15291.66. Government bond prices fell, with the yield on the benchmark 10-year Treasury climbing to 2.688%.
Michael Hanson, an economist with Bank of America BAC -1.20% Merrill Lynch, said he suspects the minutes overstate the real level of support to reduce and then stop the bond buying. The minutes may count the number of officials who adhere to a particular view, but that obscures the fact that key Fed officials such as Mr. Bernanke, Vice Chairwoman Janet Yellen and New York Fed President William Dudley are still strongly committed to pressing forward with the program, and their views dominate the policy-making process.
The minutes show the slowdown in bond buying many analysts expect in September isn't yet a done deal, Mr. Hanson said. Other issues were also left unsettled, he noted, pointing to a lack of guidance about how a gradual reduction in purchases might take place.
In the news conference after the June meeting, Mr. Bernanke said he had been "deputized" by his colleagues to sketch out their expectations for the program. He said if the economy continues to improve as the Fed expects, the central bank could make the first reduction in its bond purchases later this year. If the economy continued to meet the Fed's expectations, reductions would continue and the program would wrap up by mid-2014, Mr. Bernanke said.
Mr. Bernanke on Wednesday repeated the message he and other Fed officials have tried to convey to markets since the volatility began: pulling back on bond-buying doesn't mean the Fed is going to move quickly or aggressively toward reining in its easy-money policies. He also held out the possibility that the Fed could keep the program going longer if inflation, now near 1%, doesn't return to the Fed's 2% target.
