Transcript: Federal Reserve Chairman Ben Bernanke on U.S. economic outlook for 2012-2014
Edited by Jenny Jiang
Transcript of remarks by Federal Reserve Chairman Ben Bernanke at a press briefing on June 20, 2012:
“Good afternoon. Before we get to questions, I’ll summarize the policy actions of the Federal Open Market Committee and then place the committee’s decision in the context of our economic outlook and our collective judgement about the appropriate path of monetary policy.
“As indicated in the statement released earlier this afternoon, the committee is maintaining a highly accommodative policy. We decided to keep the target range for the federal funds rate at 0% to 0.25%. We continue to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate at least through 2014.
“In addition, the committee decided to continue through the end of the year our program of lengthening the maturity of our securities holdings rather than completing the program this month as previously scheduled.
“Specifically, the committee intends to purchase Treasury securities with remaining maturities of six years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately three years or less.
“The details of our plan for securities purchases and sales were described in an accompanying statement released today and could be found on the Federal Reserve Bank of of New York’s website.
“The continuation of the maturity extension program should put downward pressure on longer term interest rates and make broader financial conditions more accommodative than they would otherwise be, thereby supporting economic recovery.
“In conjunction with today’s meetings, FOMC participants, the seven board members, and 12 bank reserve presidents submitted their individual economic projections and policy assessments for the years 2012 to 2014 and over the longer run.
“These projections are important inputs to the committee’s deliberations. Incoming information suggests that the economy continues to expand at a moderate pace in the face of headwinds generated by the situation in Europe, a still-depressed housing market, tight credit for some borrowers, and fiscal restraint at the federal, state, and local levels.
“Business and household spending are increasing at rates consistent with moderate economic growth, though household spending appears to be rising at a somewhat slower pace than earlier this year.
“Employment gains have been smaller in recent months and the unemployment rate at 8.2% remains elevated.
“In light of these developments, committee participants have generally marked down their projections for economic growth but most still see the economy as expanding at a moderate pace over coming quarters and then picking up gradually.
“Based on their projections for economic growth, FOMC participants foresee slower progress in reducing unemployment than they did in April.
“Committee participants’ projections for the unemployment rate in the fourth quarter of this year have a central tendency of 8.0% to 8.2%, declining to 7.0% to 7.7% in the fourth quarter of 2014.
“Levels that would remain above the participants’ estimates are the longer-run normal rates of unemployment.
“In addition to projecting only slow progress in bringing down unemployment, most participants see the risk of the outlook weighted mainly toward slower growth and higher unemployment.
“In particular, participants noted that strains in global financial market associated principally with the situation in Europe continue to pose significant risks to the recovery and to further improvement in labor market conditions.
“Meanwhile, inflation has declined recently, primarily reflecting lower prices of crude oil and gasoline.
“Longer-term inflation expectations have remain stable and the committee anticipates that inflation over the medium-run will run at or below the 2% that it judges most consistent with its statutory mandate for maximum employment and price stability.
“More specifically, participants’ projections for inflation have a central tendency of 1.2% to 1.7% for 2012 and 1.5% to 2.0% for 2014.
“The economic projections submitted by FOMC participants are conditioned under individual assessments of the appropriate path of monetary policy.
“As you can see from the chart, committee participants have a range of views about when the initial increase in the federal funds rate is likely to be warranted.
“After a thorough discussion of those views and of the ongoing uncertainty and risks surrounding the outlook, the FOMC, as I mentioned, maintained its collective judgement that economic conditions warrant exceptionally low levels of the federal funds rate at least through late 2014 and it agreed to provide further support to the economy by continuing the maturity extension program.
“The committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
“Thank you. I’ll be glad to take your questions.”
- WhatTheFolly.com: Federal Reserve lowers U.S. economic outlook for 2012
- Federal Reserve: Video of press conference with Federal Open Market Committee (FOMC) Chairman Ben Bernanke on June 20, 2012
- Federal Reserve: Federal Reserve Board and Federal Open Market Committee release economic projections from the June 19-20 FOMC meeting
- Federal Reserve Bank of New York: Statement Regarding Continuation of the Maturity Extension Program
- Federal Reserve: Maturity Extension Program and Reinvestment Policy