Tran of Chairman Bernanke’s Press Conference Opening Remarks（June 19, 2013）
June 19, 2013 Chairman Bernanke’s Press Conference Opening Statement PRELIMINARY
Transcript of Chairman Bernanke’s Press Conference Opening Remarks
June 19, 2013
CHAIRMAN BERNANKE: Good afternoon. The Federal Open Market Committee (FOMC) concluded a two-day meeting earlier today. Based on its review of recent economic and financial developments, the Committee sees the economy continuing to grow at a moderate pace, notwithstanding the strong headwinds created by current federal fiscal policies.
The labor market has continued to improve, with gains in private payroll employment averaging about 200,000 jobs per month over the past six months. Job gains, along with the strengthening housing market, have in turn contributed to increases in consumer confidence and supported household spending. However, at 7.6 percent, the unemployment rate remains elevated, as do rates of underemployment and long-term unemployment. Overall, the Committee believes the downside risks to the outlook for the economy and the labor market have diminished since the fall, but we will continue to evaluate economic conditions and risks as they evolve.
Inflation has been running below the Committee’s longer-run objective of 2 percent for some time and has been a bit softer recently. The Committee believes that the recent softness partly reflects transitory factors; and, with longer-term inflation expectations remaining stable, the Committee expects inflation to move back toward its 2 percent longer-term objective over time. We will, however, be closely monitoring these developments as well.
In conjunction with this meeting, the 19 participants in our policy discussions—the 7 Board members and 12 Reserve Bank presidents—submitted individual economic projections. As always, each participant’s projections are conditioned on his or her own view of appropriate monetary policy. Generally, the projections of individual participants show they expect moderate growth, picking up over time, and gradual progress toward levels of unemployment and inflation consistent with the Federal Reserve’s statutory mandate to foster maximum employment and price stability. In brief, participants’ projections for economic growth have a central tendency of 2.3 to 2.6 percent for 2013, rising to 2.9 to 3.6 percent in 2015. The central tendency of their projections of the unemployment rate for the fourth quarter of this year is 7.2 to 7.3 percent, declining to 5.8 to 6.2 percent in the final quarter of 2015. Most participants see inflation gradually increasing from its current low level toward the Committee’s longer-run objective; the central tendency of their projections for inflation is 0.8 to 1.2 percent for this year and 1.6 to 2.0 percent for 2015.
Before turning to today’s policy decision let me say a few words about the Federal Reserve’s strategy for normalizing policy in the long run. In the minutes of its June 2011 meeting, the Committee set forth principles that it intended to follow when the time came to normalize policy and the size and the structure of the Federal Reserve’s balance sheet. As part of prudent planning, we have been reviewing these principles in recent meetings. We expect those discussions to continue and intend to provide further information at an appropriate time. For today, I will note that, in the view of most participants, the broad principles set out in June 2011 remain applicable. One difference is worth mentioning: While participants continue to think
that, in the long run, the Federal Reserve’s portfolio should consist predominantly of Treasury securities, a strong majority now expects that the Committee will not sell agency mortgage- backed securities (MBS) during the process of normalizing monetary policy, although in the longer run limited sales could be used to reduce or eliminate residual MBS holdings. I emphasize that, given the outlook and the Committee’s policy guidance, these matters are unlikely to be relevant to actual policy for quite a while.
Let me turn now to current policy issues. With unemployment still elevated and inflation below the Committee’s longer-run objective, the Committee is continuing its highly accommodative policies. As you know, in normal times the Committee eases monetary policy by lowering the target for the short-term policy interest rate, the federal funds rate. However, the target range for the federal funds rate, currently at 0 to 1/4 percent, cannot meaningfully be reduced further. Thus, we are providing policy accommodation through two alternative methods: (1) by communicating to the public the Committee’s plans for setting the federal funds rate target over the medium term and (2) by purchasing and holding Treasury securities and agency mortgage-backed securities. Let me discuss a few key points regarding each of these two policy tools.
First, today the Committee reaffirmed its expectation that the current exceptionally low range for the funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, so long as inflation and inflation expectations remain well-behaved (in the senses described in the FOMC’s statement). As I have noted frequently, the phrase “at least as long” in the Committee’s interest rate guidance is important; the economic conditions we have set out as preceding any future rate increase are thresholds, not triggers. For example, assuming that inflation is near our objective at that time, as expected, a decline in the unemployment rate to 6-1/2 percent would not lead automatically to an increase in the federal funds rate target, but rather would indicate only that it was appropriate for the Committee to consider whether the broader economic outlook justified such an increase. All else equal, the more subdued the outlook for inflation at that time, the more patient the Committee would likely be in making that assessment. In the projections submitted for this meeting, 14 of 19 FOMC participants indicated that they expect the first increase in the target for the federal funds rate to occur in 2015, and one expected the first increase to occur in 2016. Moreover, so long as the economy remains short of maximum employment, inflation remains near our longer-run objective, and inflation expectations remain well-anchored, increases in the target for the federal funds rate, once they begin, are likely to be gradual, consistent with the Committee’s balanced approach to meeting its employment and price stability objectives.
The purpose of this forward guidance about policy is to assure households and businesses that monetary policy will continue to support the recovery even as the pace of economic growth and job creation picks up. Importantly, as our statement notes, the Committee expects a considerable interval of time to pass between the time when the Committee will cease adding accommodation through asset purchases and the time when the Committee will begin to reduce accommodation by moving the federal funds rate target toward more normal levels.
The second policy tool being employed by the Committee is asset purchases—specifically, the Committee has been purchasing $40 billion per month in agency mortgage-backed securities and $45 billion per month in Treasury securities. When our program of asset purchases was initiated last September, the Committee stated the goal of promoting a substantial improvement in the outlook for the labor market in a context of price stability, and noted it would also be taking appropriate account of the efficacy and costs of the program. Today the Committee made no changes to the purchase program.
Although the Committee left the pace of purchases unchanged at today’s meeting, it has stated that it may vary the pace of purchases as economic conditions evolve. Any such change would reflect the incoming data and their implications for the outlook, as well as the cumulative progress made toward the Committee’s objectives since the program began in September. Going forward, the economic outcomes that the Committee sees as most likely involve continuing gains in labor markets, supported by moderate growth that picks up over the next several quarters as the near-term restraint from fiscal policy and other headwinds diminishes. We also see inflation moving back toward our 2 percent objective over time. If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 percent, with solid economic growth supporting further job gains—a substantial improvement from the 8.1 percent unemployment rate that prevailed when the Committee announced this program.
I would like to emphasize once more the point that our policy is in no way predetermined and will depend on the incoming data and the evolution of the outlook, as well as on the cumulative progress toward our objectives. If conditions improve faster than expected, the pace of asset purchases could be reduced somewhat more quickly. If the outlook becomes less favorable, on the other hand, or if financial conditions are judged to be inconsistent with further progress in the labor markets, reductions in the pace of purchases could be delayed; indeed, should it be needed, the Committee would be prepared to employ all of its tools, including an increase in the pace of purchases for a time, to promote a return to maximum employment in a context of price stability.
It’s also worth noting here that, even if a modest reduction in the pace of asset purchases occurs, we would not be shrinking the Federal Reserve’s portfolio of securities but only slowing the pace at which we are adding to the portfolio, while continuing to reinvest principal payments and proceeds from maturing holdings as well. These large and growing holdings will continue to
put downward pressure on longer-term interest rates. To use the analogy of driving an automobile, any slowing in the pace of purchases will be akin to letting up a bit on the gas pedal as the car picks up speed, not to beginning to apply the brakes.
I will close by drawing again the important distinction between the Committee’s decisions about adjusting the pace of asset purchases and its forward guidance regarding the target for the federal funds rate. As I mentioned, the current level of the federal funds rate target is likely to remain appropriate for a considerable period after asset purchases are concluded. To return to the driving analogy, if the incoming data support the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of purchases. However, any need to consider applying the brakes by raising short-term rates is still far in the future. In any case, no matter how conditions may evolve, the Federal Reserve remains committed to fostering substantial improvement in the outlook for the labor market in a context of price stability.
Thank you. I would be glad to take your questions.
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