Federal Reserve press conference, 2011-11-02 — Chair Ben Bernanke

Question (Jon Hilsenrath, Wall Street Journal): Jon Hilsenrath from the Wall Street Journal. Mr. Chairman, the Fed’s forecast for 2013 shows the unemployment rate finishing the year between 7.8 and 8.2 percent. The statement says that short-term rates will stay near their current levels at least through mid-2013. Does that suggest that the Fed could conceive of raising short-term interest rates before unemployment even gets to 8 percent or much lower? And if not, could you explain how people should interpret those two messages?
Answer: Well, the statement says “at least” mid-2013. So, clearly, it could well be some point beyond that, and markets are currently anticipating a somewhat later liftoff. One of the things we discussed yesterday in our communications discussion was how we might further clarify that part of the statement and try to provide more information about what conditions would prevail at the time that we would be considering raising rates. But we haven’t come to that point yet, but we certainly would like to provide more clarity about that. But again, let me emphasize that what we are saying now is “at least”; there’s no implication that we would necessarily move in mid-2013 with those conditions prevailing that you described.

Question (Greg Ip, The Economist): Greg Ip with the Economist. In response to Pedro’s question, you said you would consider more MBS purchases when the conditions were appropriate. Could you elaborate on what conditions would be appropriate to do additional large-scale asset purchases, what your reaction function is right now?
Answer: Well, I don’t think I can be as precise as you would like. I—the MBS purchases and Treasury securities purchases are one set of tools that we have. The other set of tools that we have are communication tools, which essentially tie interest rate decisions to economic conditions or to time. Those are—with interest rates close to zero, those are basically the two tools that we have, and we need to continue to work on how best to use them and in what combination to use them to achieve our objectives. In terms of when we would use these, I think all I can say is that the Committee will have to look at the outlook, and if it judges that we are falling sufficiently far short of our objectives in terms of inflation falling at or below its target and growth being insufficient, and that we believe that monetary stimulus would be beneficial, you know, then the Committee obviously would try to take corrective action. But I can’t—you know, it’s a Committee decision, we’ll have to look at the outlook. But we remain prepared to take action as appropriate to make sure the recovery continues, to make sure that we have stable prices in the U.S.