Federal Reserve press conference, 2013-09-18 — Chair Ben Bernanke

Question (Steve Liesman, CNBC): Steve Liesman, with CNBC. Mr. Chairman, one question—just three parts, if you don’t mind. Have you indicated to President Obama you did not want to serve a third term? If so, when? Or did President Obama indicate to you he did not want you to serve a third term? And those two parts notwithstanding, would you serve a third term if asked, either wholly or in part? Thank you.
Answer: Well, it’s convenient because I have the same answer to all three parts of your question. If you will indulge me just a little longer, I prefer not to talk about my plans at this point. I hope to have more information for you at some reasonably soon date, but today I want to focus on monetary policy. I’d prefer not to talk about my own plans.

Question (Steven Beckner, MNI): Steve Beckner of MNI, Mr. Chairman. A number of economists, and, indeed, some of your Fed colleagues, have argued that the effectiveness of quantitative easing has greatly diminished, if not disappeared, and they point to the recent performance of the economy as proof of that. And there have been a number of people who have argued that there are regulatory and other impediments to growth beyond the reach of monetary policy. To what extent are these valid arguments? And if the economy does not speed up, if it does not reach your objectives, how will you ever get out of quantitative easing?
Answer: Well, on the effectiveness of our asset purchases, it’s difficult to get a precise measure. There’s a large academic literature on this subject, and they have a range of results, some suggesting that this is a quite powerful tool, some that it’s less powerful. My own assessment is that it has been effective. If you look at the recovery, you see that some of the strongest sectors, the leading sectors like housing and autos, have been interest- sensitive sectors. And that these policies have been successful in strengthening financial conditions, lowering interest rates, and thereby promoting recovery. So I do think that they have been effective. You mentioned that there hasn’t been any progress. There has been a lot of progress. As I said at the beginning, labor market indicators, while still not where we’d like them to be, are much better today than they were when we began this latest program a year ago. And, importantly—as actually is referenced in our FOMC statement—that happened notwithstanding a set of fiscal policies which the CBO said would cost between 1 and 1½ percentage points of real growth and hundreds of thousands of jobs. So the fact that we have maintained improvements in the labor market that are as good or better than the previous year, notwithstanding this fiscal drag, is some indication that there is at least a partial offset from monetary policy. Now, just as you say, there are a lot of things in the economy that monetary policy can’t address. They include the effectiveness of regulation, they include fiscal policy, they include developments in the private sector. We do what we can do and what—if we can get help, we’re delighted to have help from other policymakers and from the private sector and we hope that that will happen. The criterion for ending asset purchases is not, you know, some very high rate of growth. What it is is the criterion—let me just remind you, the criterion is a substantial improvement in the outlook for the labor market, and we have made significant improvement. Ultimately, we will reach that level of substantial improvement, and at that point, we will be able to wind down the asset purchases. Again, you know, and I think people don’t fully appreciate that we have two tools: We have asset purchases, and we have rate policy and guidance about rates. It’s our view that the latter, the rate policy, is actually the stronger, more reliable tool. And when we get to the point where we can, you know, where we are close enough to full employment that rate policy will be sufficient, I think that we will still be able to provide—even if asset purchases are reduced—we will still be able to provide a highly accommodative monetary background that will allow the economy to continue to grow and move towards full employment.

Question (Kate Davidson, Politico): Mr. Chairman, Kate Davidson from Politico. Do you think that all of the recent attention being paid to who will be your replacement has had any immediate effect on the Fed, and could it have any lingering effect on your successor? And also, do you think the process has just become too politicized, or is this part of a healthy debate?
Answer: I think the Federal Reserve has strong institutional credibility. And it is a strong institution, a highly competent institution, and it’s independent, it’s nonpartisan, and I’m not particularly concerned about the political environment for the Federal Reserve. I think the Fed will be—continue to be an important institution in the United States, and that it will maintain its independence going forward.