US Fed chief targets unemployment
15 Sep 2012
US Federal Reserve chairman Ben Bernanke, who unveiled the third round of asset purchases by the central bank – dubbed quantitative easing three (QE3) – aims to buy at least $40 billion of mortgage debt every month to improve the job market.
'''We are trying to create more employment,'' declared Bernanke, indicating a shift from the inflation-battling image that central banks have acquired in recent years. The open-ended buying of mortgage-backed bonds will continue indefinitely, or at least till the unemployment rate comes down.
US jobless rate peaked at 10 per cent in October 2009, but still continues to hover over eight per cent. The Fed has already spent about $2 trillion since 2008 in large-scale asset purchases (through QE 1 and 2) and aims to continue spending money, despite criticism from the Republicans.
Mitt Romney, the Republican presidential candidate, reiterated that Bernanke should be replaced when his term expires in January 2014. President Barack Obama reappointed Bernanke for a second term in 2010.
Romney noted in an interview that while Obama claimed the economy was improving, Bernanke's actions indicated it had not. ''But printing more money at this point comes at a higher cost than the benefit it's going to create,'' said Romney.
Bernanke said that the Fed was committed to leave the key short-term interest rate at zero to 0.25 per cent till mid-2015. He indicated that even after the unemployment rate starts falling, the Fed will not rush in to tighten policy.
''This is a Main Street policy, because what we're about here is trying to get jobs going,'' Bernanke said told the media in Washington. ''We're trying to create more employment. We're trying to meet our maximum employment mandate, so that's the objective.''
The Fed chief was also not worried about the economy overheating any time soon. Inflation is expected to range between 1.6 per cent and two per cent over the next two years, though unemployment is likely to fall to between 7.6 per cent and 7.9 per cent by the end of 2013, and between 6.7 per cent and 7.3 per cent a year later.
