WASHINGTON – Ben Bernanke said Wednesday the U.S. economy is gradually improving but emphasized that the Federal Reserve is not locked into any timetable for scaling back policies aimed at jolting growth.
The Fed chairman told Congress there is no preset course and that any decision to reduce its $85 billion-a-month bond-buying program will depend on how the economy performs. And he said the Fed could maintain or increase those purchases if it sensed the economy was weakening.
The bond purchases have kept long-term interest rates low, spurred a stock market rally and encouraged more borrowing and spending.
The U.S. economy is getting a lift from the recovering housing market and steady hiring, Bernanke said. But it is being held back by domestic spending cuts and slower growth abroad. The Fed is also closely monitoring inflation, which has fallen below the Fed’s 2 percent target.
Because our asset purchases depend on economic and financial developments, they are by no means on a preset course, he told the House Financial Services Committee during the first of two days of testimony this week on the Fed’s semiannual report. He will appear today before the Senate Banking Committee.
Investors interpreted Bernanke’s comments to mean the Fed may not be in as much of a rush to trim its stimulus as previously thought.
The Dow Jones industrial average rose 19 points to close up at 15,470. Broader indexes also gained on the day.
Bernanke’s remarks were his latest attempt to calm markets, which have gyrated wildly since the Fed’s June meeting.
Last month, stocks plunged after Bernanke said the Fed could slow the bond purchases later this year and end them next year if the economy strengthens.
Since then, Bernanke and other Fed members have stressed that any change in policy depends on improvement in the job market and economy, not a target date. That has helped push stocks to new highs.