Fed Holds First-Ever Press Conference

Federal Reserve policymakers decided to leave short-term interest rates unchanged. A statement released after the meeting said the recovery is on "firmer footing" and noted a pick up in commodity prices. But Fed policymakers do not think the upward pressure on prices will result in a longer-term inflation problem. Fed Chairman Ben Bernanke answers questions from reporters Wednesday afternoon in the Fed's first ever post-meeting press conference. Michele Norris talks with NPR's John Ydstie.

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MELISSA BLOCK, Host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

MICHELE NORRIS, Host:

And I'm Michele Norris.

It was a historic day at the Federal Reserve. Fed Chairman Ben Bernanke walked into a conference room at the central bank to hold the first of what will be regular press conferences.

BEN BERNANKE: Good afternoon. Welcome. In my opening remarks I'd like to briefly first review today's policy decision.

NORRIS: With that, Bernanke began a statement which was followed by a Q&A. And while Bernanke may not have made a lot of news, the fact that a Fed chairman was taking questions from reporters right after a Fed meeting was news in itself.

And NPR's John Ydstie was at the Fed today, and he joins us now in the studio to talk about it. Hey, John.

JOHN YDSTIE: Hi, Michele.

NORRIS: The Fed has been a very tight lipped institution...

YDSTIE: It has.

NORRIS: ...until relatively recently. Did Bernanke give any reason for deciding it was time to now begin holding these regular press conferences?

YDSTIE: He did. And he started by talking about the old days of central banking secrecy.

BERNANKE: It used to be that the mystique of central banking was all about not letting anybody know what you were doing.

YDSTIE: Actually, Michele, central bankers thought their policies worked best if they kept the market guessing. They actually called it constructive ambiguity. In fact, you may remember that Alan Greenspan reportedly once said: If you understood what I said, I must have misspoke.

Now, Greenspan did start moves toward more openness during his tenure. And Bernanke said he's always supported better communication by central banks.

BERNANKE: I personally, I have always been a big believer in providing as much information as you can to help the public understand what you're doing, to help the markets understand what you're doing, and to be accountable to the public for what you're doing.

NORRIS: John, as we said earlier, Ben Bernanke did not make a lot of news beyond the event itself. And that's probably what the Fed had hoped for.

YDSTIE: That's right. I don't think the chairman sees these events as opportunities to make news. But rather, as he said, a forum for explaining the Fed's actions and that's what he did today. In his opening remarks, he reviewed and elaborated on the statement from the Open Market Committee that it issued just before the news conference. It was much the same statement from the previous meeting.

The committee said the recovery is proceeding moderately with labor market gradually improving but housing still depressed. The statement said increases in commodities prices are adding to inflation but it sees inflation is transitory, not likely to turn into an inflation spiral. And the committee said, again, it's likely to keep interest rates exceptionally low for an extended period of time.

NORRIS: The Fed has been buying bonds recently to try to stimulate the economy. It's something called quantitative easing. The Fed has said it's supposed to and in June, a temporary measure. Will it in fact and in June?

YDSTIE: Well, yes. Bernanke said the Fed will stop when it's bought $600 billion in government bonds and then hold of that level. Now, a lot of economists have criticized the program saying there is no indication it's helped. And I asked Bernanke about that criticism during the press conference. He defended the program, saying it had helped boost growth and job creation and the stock market.

So, if that's the case, I asked him with unemployment at nearly nine percent, why not extend the stimulus? He said it's because inflation risks are rising.

BERNANKE: It's not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we're going to have success in creating a long-run, sustainable recovery with lots of job growth, we've got to keep inflation under control.

NORRIS: And as he talks about the long-run that's not great news for millions of Americans who remain unemployed or underemployed.

YDSTIE: No, it's not and the chairman, I think, realized that. And he ended his news conference saying he understands people are suffering from the current combination of high unemployment, high gas prices and high foreclosure rates. But Bernanke added he believes that ultimately the United States economy can and will return to health, and its preeminent place in the global economy.

NORRIS: I got to let you go in just a second. But does the Fed think this is a good idea on the whole? I know this is something he wanted to do.

YDSTIE: Yeah, I think so, generally. Actually, this idea came from a subcommittee headed by another Fed governor, Janet Yellen. So I think there's consensus that this is the right way to go.

NORRIS: That's NPR's John Ydstie. John, thanks so much.

BERNANKE: You're welcome.

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