Bernanke tries to calm markets with support pledge

Chairman Ben Bernanke tried to reassure markets the Federal Reserve would not step away from supporting a weak economy in his testimony to US Congress yesterday.

He reiterated asset purchases will slow from $85bn a month later this year if the economy stays strong, but emphasized the Fed was not turning away from easy monetary policy, the Financial Times reports.

Bernanke (pictured) said the Fed’s tapering of asset purchases would depend entirely on the performance of the economy and the programme could even be increased if necessary.

He warned the unemployment rate remains well above its longer-run normal level and “rates of underemployment and long-term unemployment are still much too high”.

“With unemployment still high and declining only gradually, and with inflation running below the Committee’s longer-run objective, a highly accommodative monetary policy will remain appropriate for the foreseeable future,” said Bernanke.

“I think the markets are beginning to understand our message and, you know, the volatility has obviously moderated.”

His comments helped calm markets with the yield on 10-year treasuries dropping back below 2.50%, down from 2.55% before the speech. The Dow Jones closed the day up 0.12% at 15470.52.

This article has previously been published on Investment Week.

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