ben s bernanke : semiannual monetary policy report to the congress speech by mr ben s bernanke, chairman of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 26 february 2013. * * * chairman johnson, ranking member crapo, and other members of the committee, i am pleased to present the federal reserve ’ s semiannual monetary policy report. i will begin with a short summary of current economic conditions and then discuss aspects of monetary and fiscal policy. current economic conditions since i last reported to this committee in mid - 2012, economic activity in the united states has continued to expand at a moderate if somewhat uneven pace. in particular, real gross domestic product ( gdp ) is estimated to have risen at an annual rate of about 3 percent in the third quarter but to have been essentially flat in the fourth quarter. 1 the pause in real gdp growth last quarter does not appear to reflect a stalling - out of the recovery. rather, economic activity was temporarily restrained by weather - related disruptions and by transitory declines in a few volatile categories of spending, even as demand by u. s. households and businesses continued to expand. available information suggests that economic growth has picked up again this year. consistent with the moderate pace of economic growth, conditions in the labor market have been improving gradually. since july, nonfarm payroll employment has increased by 175, 000 jobs per month on average, and the unemployment rate declined 0. 3 percentage point to 7. 9 percent over the same period. cumulatively, private - sector payrolls have now grown by about 6. 1 million jobs since their low point in early 2010, and the unemployment rate has fallen a bit more than 2 percentage points since its cyclical peak in late 2009. despite these gains, however, the job market remains generally weak, with the unemployment rate well above its longer - run normal level. about 4. 7 million of the unemployed have been without a job for six months or more, and millions more would like full - time employment but are able to find only part - time work. high unemployment has substantial costs, including not only the hardship faced by the unemployed and their families, but also the harm done to the vitality and productive potential of our economy as a whole. lengthy periods of unemployment and underemployment can erode workers'skills and attachment to the labor force or prevent young people from gaining

point above the committee ’ s 2 percent longer - run goal, and longer - term inflation expectations continue to be well anchored. ” 2 an advantage of the new formulation, relative to the previous date - based guidance, is that it allows market participants and the public to update their monetary policy expectations more accurately in response to new information about the economic outlook. the new guidance also serves to underscore the committee ’ s intention to maintain accommodation as long as needed to promote a stronger economic recovery with stable prices. 3 the second type of nontraditional policy tool employed by the fomc is large - scale purchases of longer - term securities, which, like our forward guidance, are intended to support economic growth by putting downward pressure on longer - term interest rates. the federal reserve has engaged in several rounds of such purchases since late 2008. last september the fomc announced that it would purchase agency mortgage - backed securities at a pace of $ 40 billion per month, and in december the committee stated that, in addition, beginning in january it would purchase longer - term treasury securities at an initial pace of $ 45 billion per month. 4 these additional purchases of longer - term treasury securities replace the purchases we were conducting under our now - completed maturity extension program, see board of governors of the federal reserve system ( 2012 ), “ federal reserve issues fomc statement, ” press release, december 12. the numerical values for unemployment and inflation included in the guidance are thresholds, not triggers ; that is, depending on economic circumstances at the time, the committee may judge that it is not appropriate to begin raising its target for the federal funds rate as soon as one or both of the thresholds is reached. the 6 - 1 / 2 percent threshold for the unemployment rate should not be interpreted as the committee ’ s longer - term objective for unemployment ; because monetary policy affects the economy with a lag, the first increase in the target for the funds rate will likely have to occur when the unemployment rate is still above its longer - run normal level. likewise, the committee has not altered its longer - run goal for inflation of 2 percent, and it neither seeks nor expects a persistent increase in inflation above that target. see board of governors of the federal reserve system ( 2012 ), “ federal reserve issues fomc statement, ” press release, september 13 ; and board of governors, “ fomc statement, ” december 12, in note 2. bis central bankers ’ speeches which lengthened the maturity