Highlights: Bernanke news conference on Fed policy
WASHINGTON (Reuters) - Below are highlights from Federal Reserve Chairman Ben Bernanke's news conference following the Fed's policy meeting on Wednesday.
ON CYCLICAL UNEMPLOYMENT:
"We believe that a good bit of the unemployment were are seeing is what economists would call cyclical unemployment, that is unemployment arising because of inadequate demand in the economy. If that is the case, then monetary policy by lowering interest rates, making financial conditions more accommodative, should stimulate demand, stimulate spending and over a period of time that should help bring cyclical unemployment down. It's also possible that some of the increase in unemployment reflects so-called structural factors, mismatches between worker skills and job opportunities, loss of skills, geographical location, etc. If that's the case then monetary policy is much less effective because only other kinds of labor market policies can make progress against that type of unemployment. But again I do think that a considerable part of the unemployment that we are seeing is cyclical. Final comment, cyclical unemployment left untreated, so to speak, for a long time can become structural unemployment as people lose skills, they lose attachment to the labor force."
ON INCREASING COMMUNICATION ABOUT POLICY:
There is no final outcome here in this discussion. Clearly there is a range of things that we can do. We can give more information about our objectives. For example we can provide information about where we want inflation to be in the long-term. We can also provide information about the future path of interest rates. An alternative approach is to tie that to economic conditions and provide information about under what circumstances that we would raise rates. It's certainly something that we have discussed, I think it's an interesting alternative. There is a lot of interest is using the survey of economic projections in constructive ways."
ON CREDIT STANDARDS BLUNTING LOW MORTGAGE RATES:
"One area where monetary policy has been blunted, the effects have been blunted, has been the mortgage market, where very tight credit standards have prevented many people from purchasing or refinancing their homes and therefore the low mortgage rates that we have achieved have not been as effective as we had hoped. So monetary policy may be somewhat less powerful in the current context than it has been in the past, but nevertheless it is affecting economic growth and job creation."
ON ECONOMY ABSENT MONETARY POLICY SUPPORT:
"I would argue that we've also been successful in some of the later actions that we've taken, although it's early to say for things like the maturity extension program. But we always face the problem of asking the question, 'where would we be without these policies?' Our best estimates are that absent the support of monetary policy, the economy would be in a much deeper ditch and unemployment would be much higher than it is. That being said, you know, again, people rightly recognize that we haven't gotten the economy back to where we want it to be and their dissatisfaction is perfectly understandable." Continued...