Federal Reserve press conference, 2011-04-27 — Chair Ben Bernanke

Question (Unknown Reporter, nan): Is it in the Fed’s power to reduce the rate of unemployment more quickly? How would you do that, and why are you not doing it?
Answer: Well, I should say, first of all, that, in terms of trying to help this economy stabilize and then recover, the Federal Reserve has undertaken extraordinary measures. Those include, obviously, all the steps we took to stabilize the financial system during the crisis—again, many of which were extraordinary measures taken under extreme circumstances. Even beyond the steps we took to stabilize the system, we have created new ways to ease monetary policy. We’ve brought the federal funds rate target close to zero. We have used forward guidance in our language to affect expectations of policy changes. And, of course, as everyone knows, we have now been through two rounds of purchases of longer-term securities, which have seemed to have been effective in easing financial conditions and, therefore, providing support for recovery and for employment. Going forward, we’ll have to continue to make judgments about whether additional steps are warranted. But as we do so, we have to keep in mind that we do have a dual mandate, that we do have to worry about both the rate of growth but also the inflation rate. And as I was indicating earlier, I think that—even purely from an employment perspective—that if inflation were to become unmoored, inflation expectations were to rise significantly, that the cost of that in terms of employment loss in the future, as we had to respond to that, would be quite significant. And so we do have to make sure that we are paying adequate attention to both sides of our mandate. But clearly it is the case that we have done extraordinary things in order to try to help this economy recover.

Question (Anthony Mason, CBS News): Mr. Chairman, Anthony Mason, CBS. This is that rare news conference that actually makes news before it happens. Can you talk a little bit about your decision to take this historic step of holding a news conference after a Fed meeting—why you chose to do it; what anxieties you may have had about doing it; and how, say, facing the media compares to facing Congress.
Answer: Thanks, mom [laughing]. Well, the Federal Reserve has been looking for ways to increase its transparency now for many years, and we’ve made a lot of progress. It used to be that the mystique of central banking was all about not letting anybody know what you were doing. As recently as 1994, the Federal Reserve didn’t even tell the public when it changed the target for the federal funds rate. Since then, we have taken a number of steps. A statement, which includes a vote. We have—we produce very detailed minutes which are released only three weeks after the meeting, which is essentially a production lag. We now provide quarterly projections, including long-run objectives as well as near-term outlook. We have substantial means of communicating through speeches, testimony, and the like. And so we have become, I think, a very—a very transparent central bank. That being said, we had a subcommittee headed by the Vice Chair of the Board, Janet Yellen, looking for yet additional steps to take to provide additional transparency and accountability. And the press conference was—came right to the top, because this is an area, first of all, where global central bank practice includes now—many central banks do use press conferences, and we have some experience with them. And, secondly, it does provide a chance for the Chairman, in this case, to provide some additional color and context for both—in this case both the meeting and the projections that are being made by the Committee. So we thought it was a natural next step. We’re not done. We’re continuing to look for additional things that we can do to be more transparent and more accountable. But we think this is the right way to go. And I personally have always been a big believer in providing as much information as you can to help the public understand what you’re doing, to help the markets understand what you’re doing, and to be accountable to the public for what you’re doing. Now, of course, the Fed didn’t do this for a long time. And I think the counterargument has always been that, if there was a risk, that the Chairman speaking might create unnecessary volatility in financial markets or may not be necessary, given all the other sources of—of information that come out of the Federal Reserve. It was our judgment, after thinking about this for some time, that at this point, the additional benefits from more information, more transparency, meeting the press directly, outweigh some of these—some of these risks. And I think, over time, you know, we’ll experiment to try to make sure that this is as effective a venue as possible.