Federal Reserve press conference, 2012-04-25 — Chair Ben Bernanke

Question (Steve Liesman, CNBC): Mr. Chairman, according to the latest forecast, 10 members of the FOMC see a 1 percent or higher fed funds rate in 2014; 7 of them see a 2 percent or higher fed funds rate. Under that—those conditions, how can the guidance in the statement, that you remain exceptionally low through late 2014, be justified? And is there a point at which the dissonance between the individual forecasts and the guidance get to a point where one or the other is no longer tenable?
Answer: Well, there’s certainly a range of views, as you’ve noted, but these projections are inputs into a Committee process. And it’s in the Committee meeting that we had yesterday and today where we debate not only the possible outcomes, but also the risks, the uncertainties, all the things that inform our collective judgment. And as I said, the Committee had no difficulty coming to a consensus that the guidance that we gave is still appropriate. Again, if there’s a substantial change in the economic outlook in either direction, then the guidance would change appropriately. But for now, I think the Committee is comfortable with the consensus statement that we put out.

Question (Greg Ip, The Economist): Greg Ip of the Economist. First, assume that you are not constrained by the zero nominal bound right now. What would the federal funds rate be, even if it were a negative number? And do you believe that you are at an equivalent degree of monetary accommodation today using your unconventional tools? And also, a quick supplemental—could you put some numbers on what—on the meaning of “exceptionally low” federal funds rate? For example, would a 1 percent federal funds rate qualify as “exceptionally low” at the end of 2014?
Answer: Well, the exact reading for the federal funds rate today, in the absence of the zero lower bound, would depend a lot on which particular rule, what particular model that you use. I don’t want to cite a particular number, but it probably would be negative. And in that respect, we are trying to compensate for that by the use of nonstandard tools, including, as you know, almost a $3 trillion balance sheet. We see monetary policy as being approximately in the right place at this point, based on the analysis that we’ve been doing in—of the economy and the outlook. That doesn’t mean we might not take further action; we are certainly prepared to take further action. But for the time being, it appears that we are more or less in the right place.