Federal Reserve press conference, 2013-12-18 — Chair Ben Bernanke

Question (Ylan Mui, Washington Post): Thank you. Ylan Mui with the Washington Post. Today was the first reduction in asset purchases, and you just said that future reductions will likely occur in measured steps, but are not on a predetermined course. Can you tell us any more about the framework that you all plan to use to determine the size and the timing of those reductions? And previously you had said that you expect the program to end altogether by the middle of next year. Is that still a likely scenario?
Answer: Well, as I said, the steps that we take will be data- dependent. If we’re making progress in terms of inflation and continued job gains—and I imagine we’ll continue to do, probably at each meeting, a measured reduction—that would take us to late in the year, certainly not by the middle of the year. If the economy slows for some reason or we are disappointed in the outcomes, we could skip a meeting or two. On the other side, if things really pick up, then of course we could go a bit faster, but my expectation is for similar moderate steps going forward throughout most of 2014.

Question (Robin Harding, Financial Times): Robin Harding from the Financial Times. Mr. Chairman, your inflation forecasts never get back to 2 percent in the time horizon that you cover here, out to 2016. Given that, why should we believe the Fed has a symmetric inflation target? And, in particular, why should we believe you’re following an optimal policy—optimal control policy, as you’ve said in the past—given that that would imply inflation going a bit above target at some point? Thank you.
Answer: Well, again, these are individual estimates, there are big standard errors implicitly around them and so on. We do think that inflation will gradually move back to 2 percent, and we allow for the possibility, as you know, in our guidance that it could go as high as 2½ percent. Even though inflation has been quite low in 2013, let me give you the case for why inflation might rise. First, there are some special factors, such as health-care costs and some other things, that have been unusually low and might be reversed. Secondly, if you look at the fundamentals for inflation, including inflation expectations, whether measured by financial markets or surveys; if you look at growth, which we now anticipate will be picking up both in the U.S. and internationally; if you look at wages, which have been growing at 2 percent and a little bit higher according to many indicators—all of these things suggest that inflation will gradually pick up. But what I tried to emphasize in my opening remarks, and which is clear in our statement, is that we take this very seriously. It’s not easy to—inflation cannot be picked up and moved where you want it. It takes—it requires, obviously, some luck and some good policy. But we are very committed to making sure that inflation does not stay too low, and we are continuing to monitor that very carefully and to take whatever actions necessary to achieve that.