Chairman Ben Bernanke told Congress Wednesday that the U.S. job market remains weak and that it is too soon for the Federal Reserve to slow its extraordinary stimulus programs.
Reducing the Fed’s efforts to keep borrowing rates low would “carry a substantial risk of slowing or ending the economic recovery,” Bernanke said in testimony to the Joint Economic Committee, a panel that includes members of the House and Senate.
The Fed has been buying $85 billion a month in Treasury and mortgage bonds since September. That has helped lower long-term interest rates and encouraged more borrowing and spending.
Lawmakers pressed Bernanke to explain when the Fed might start to scale back its purchases. Bernanke said the pace could be reduced over the next few meetings, if the job market shows “real and sustainable progress.” And he wouldn’t rule out curtailing the purchases by Labor Day.
But Bernanke, a Dillon native, said that the Fed could just as quickly reverse course and pick up the pace if the economy falters.
Most of Bernanke’s testimony focused on the many risks facing the economy, along with the benefits gained so far from the Fed’s stimulus. His comments suggest the Fed is not ready to taper the bond purchases.
Minutes of the Fed’s April 30-May 1 meeting show “a number” of members expressed a willingness to scale back the bond purchases as early as June – if the economy showed strong and sustained growth. But those officials appeared at odds over what evidence would demonstrate such gains, according to the minutes released Wednesday.
The Fed next meets on June 18-19.
Stocks surged immediately after Bernanke began speaking at 10 a.m. But they gradually fell during Bernanke’s testimony and then turned negative in the afternoon.