Bernanke Makes Case for Further Asset Purchases as Fed Sets Inflation Goal

Ben S. Bernanke laid the groundwork for a third round of large-scale asset purchases should unemployment remains higher than the Federal Reserve would like while inflation falls below a newly-established target. The Federal Open Market Committee “recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation,” Bernanke said yesterday at a press conference in Washington. Stocks and Treasuries rallied after policy makers said the benchmark interest rate would stay low until at least late 2014, pushing back a previous date of mid-2013. Fed officials also lowered their projections for economic expansion and inflation for this year and next. The U.S. central bank’s “two main tools” to boost growth are asset purchases and communications, and bond buying is “an option that is certainly on the table,” Bernanke said. “The unemployment level is elevated and the inflation outlook is subdued.” Policy makers yesterday set a long-term goal of 2 percent inflation, and forecast that price increases would fall short of that target this year and next. The personal consumption expenditures price index (SPX) climbed 2.5 percent for the 12 months ending in November.