WASHINGTON (Reuters) - Below are highlights from Federal Reserve Chairman Ben Bernanke's news conference following the Fed's policy meeting on Wednesday.
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"Expanding the balance sheet certainly remains an option, one that we would consider very seriously if, in particular, if progress towards full employment...became more inadequate or if inflation remained exceptionally low. So we will continue to look at that."
"We are not absolutists. If there is a need to let inflation return a little bit more slowly to target to get a better result on unemployment then that is something that we would be willing to do."
"If the situation continues with inflation below target and unemployment declining at a rate which is very, very slow, then our framework, the logic of our framework says, we should be looking for ways to do more. ... We need to adopt policies that will both achieve our inflation objectives and help the economy recover as quickly as feasible. I would say that your question, actually and the earlier question, shows the benefit of explaining this framework, because the framework makes very clear that we need to be thinking about ways to provide further stimulus if we don't get improvement in the pace of recovery and a normalization of inflation."
"It seems very likely that principal forgiveness could be helpful, depending on how it is structured, in reducing delinquencies. There are also some potential drawbacks. One of them is the fact that the amount of negative equity in the United States is about $700 billion, which is enormous and so there is no conceivable program (that will get) everybody in the country above water. And so I think the issue then becomes if we have $20 (billion) or $25 billion or whatever the number may end up being in this settlement, what is the most cost effective way to help as many people as possible. And I think that is an ongoing debate."
"The weakness of the housing sector is an important reason why the economy is not recovering more robustly, and the problems in housing finance (are) a part of the reason why monetary policy has not been more powerful because part of our transmission mechanism is through lower interest rates which affects refinancing. It affects sales and purchases as well. And so in addition to that as bank supervisors we have considerable interest in servicing, loan modifications, in delinquencies and all the aspects of mortgage lending."
"Strains in global financial markets continue to pose significant downside risk to that outlook.
"Looking further ahead, economic activity is expected to accelerate gradually in conjunction with strengthening consumer and business confidence, improving financial conditions and the continuation of a highly accommodative stance for monetary policy.
"A number of recent indicators point to some further improvement in overall labor market conditions but the unemployment rate remains elevated. Moreover, in light of the anticipated modest pace of economic recovery, the committee expects that over coming quarters the unemployment rate will decline only gradually towards its mandate consistent levels."
"One implication of our extension of our expected point of take off to late 2014 is to imply that the initial sales from our balance sheet, which again are far down the road, but when that begins that will be later than previously thought, that will be presumably in 2015. So, we do expect to hold our balance sheet at a high level for a longer period."
"We are concerned that the large amount of long-term unemployment may be causing some workers to lose skills or lose labor force attachment which at least for a while will also likely increase the so-called natural rate or sustainable rate of unemployment. So there are a number of factors working in that direction. But in any case while there is certainly a lot of uncertainty about exactly where the natural rate of unemployment is, clearly at 8.5 percent, I think we're comfortably above anybody's estimate and for that reason we still consider the labor market to be obviously quite flat."
"We are obviously hoping that the strength we saw in the fourth quarter and in recent data will continue into 2012, but we are going to continue to monitor that situation. I don't think we are ready to declare that we have entered a new, a stronger phase at this point. ... We continue to review our holdings, our portfolio holdings, securities, and we are prepared to take further steps in that direction if we see that the recovery is faltering or if inflation is not moving towards target. It's an option that's certainly on the table. It would be premature to say definitively one way or the other, but we continue to look at the option, and if conditions warrant, we will certainly consider using it."
"Now all that being said, if inflation is going to remain below target for an extended period and unemployment progress is very slow than I think you're implicit question is right there is a case for an additional policy action and we want to continue to observe the situation but we are certainly prepared to look for a different ways to provide support to the economy if in fact we have this unsatisfactory situation."
"The committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with our statutory mandate. Over time a higher inflation rate would reduce the public's ability to make accurate longer-term economic and financial decisions, whereas a lower inflation rate would be associated with an elevated probability of falling into deflation, which can lead to significant economic problems. Clearly communicating to the public this 2 percent goal for inflation over the longer run should help foster price stability and moderate long-term interest rates and will enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. Maximum employment stands on an equal footing with price stability as an objective for monetary policy."
"Incoming information such as the economy has been expanding moderately notwithstanding some slowing in global growth. The Committee expect the pace of economic growth to be moderate over coming quarters, reflecting ongoing drags in the housing sector and still tight credit conditions for many households and smaller businesses. Specifically, participants projections for the growth rate of real gross domestic product in 2012 and the central tendency of 2.2 to 2.7 percent. Strains in global financial markets continue to pose significant downside risk to that outlook."