Fed Reserve chairman Ben Bernanke said on Thursday it was too soon to judge if recent mixed signals from the US economy would prompt the central bank to delay plans to trim its bond buying later this year. In what could be his final appearance before Congress, the Fed chief was asked if a recent run of disappointing economic data could undermine the case to begin scaling back asset purchases in September, as financial markets currently expect.
The June FOMC meeting was only a few weeks ago, Bernanke said, referring to the policy-setting Federal Open Market Committee. There have been some data points since then and ... they have been mixed. So I think it's way too early to make any judgment. Bernanke's current term at the helm of the central bank ends in January and he is widely expected to depart at that point.
He remained silent on his future plans during the two-hour hearing before the Senate Banking Committee, whose members offered generous praise for what one termed as his "quiet leadership" during the 2007-2009 financial crisis. As he had in a separate round of testimony of a panel in the House of Representatives on Wednesday, Bernanke said headwinds from a tightening fiscal policy had held back growth, and the economy should pick up pace once this drag fades away.
The Fed has held interest rates near zero since late 2008, and more than tripled the size of balance sheet to nearly $3.5 trillion through massive bond buying, aimed at driving down long-term borrowing costs and spurring a stronger recovery. It currently is buying a mix of government and mortgage-backed debt at a pace of $85 billion a month.
Bernanke announced last month that the Fed expects to begin tapering these purchases later this year with an eye to ending them altogether by mid-2014, when the unemployment rate should be around 7%. The jobless rate was 7.6% in June.
We will obviously review the data and what were looking for is a pick up as the year progresses, Bernanke told Senator Charles Schumer, a Democrat from New York, who pressed him repeatedly for a hint that tapering was on track for September.
The FOMC next meets on July 30-31 and September 17-18. Bernanke will hold a news conference after the September meeting. The US economy grew at a lacklustre 1.8% annual rate in the first quarter and economists, taking into account a string