Bernanke Expects Jobs Market To Strengthen

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Federal Reserve Chairman Ben Bernanke conducted the first full-fledged news conference ever by a Fed chairman Wednesday. The simple fact that the event took place was the big news, but the gathering did yield several interesting nuggets.

RENEE MONTAGNE, host:

Until yesterday, no chairman of the Federal Reserve had ever given a full-fledged news conference. Fed chairman Ben Bernanke broke with that tradition -the simple fact that the event took place was the big news.

Still, as NPR's John Ydstie reports, the gathering did yield several interesting nuggets.

JOHN YDSTIE: Chairman Bernanke conducted the press conference from a desk on a raised dais in a Fed conference room. He looked a bit like the former professor he is, fielding questions from a class numbering about 60, in this case reporters, not students. Bernanke explained why his Fed had chosen to communicate in this way.

Mr. BEN BERNANKE (Federal Reserve Chairman): I personally 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.

YDSTIE: The Fed chairman spent much of the rest of the press conference explaining the balancing act the Fed is engaged in. It's trying to stimulate the economy and bring down unemployment through low interest rates and a second round of quantitative easing, the bond-buying program that's injecting money into the economy. It's nicknamed QE2.

At the same time, the Fed is carefully watching to make sure those policies don't spark inflation. Many economists say the QE2 stimulus hasn't worked. Bernanke disagreed, saying it's boosted economic activity, job growth and the stock market. But he made clear there's unlikely to be a QE3, another round of stimulus, because of a rising risk of inflation.

Mr. 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 to success in creating a long-run sustainable recovery with lots of job growth, we've got to keep inflation under control.

YDSTIE: Bernanke and the Fed's policy-making committee acknowledged yesterday that rising commodity prices, including the rising price of oil, are boosting inflation. They said, however, they believe the price rises are transitory and that inflation will return to lower levels.

The added focus on inflation risks caught the attention of Tim Dewey, a University of Oregon professor who writes a blog called Tim Dewey Fed Watch.

Professor TIM DEWEY (University of Oregon): He came off to me a little bit more hawkish in some of those statements than I would have anticipated.

YDSTIE: But that hawkishness or willingness to take action to raise interest rates was not evident in yesterday's statement from the Fed's Open Market Committee. The committee repeated again that it expects short-term interest rates to remain exceptionally low - that is, near zero - for an extended period.

Bernanke was asked to define what an extended period means.

Mr. BERNANKE: Extended period suggests that there would be a couple of meetings probably before action, but unfortunately the reason we use this vaguer terminology is that we don't know with certainty how quickly response will be required.

YDSTIE: Randall Kroszner, a former Fed governor, who is now a professor at the University of Chicago Booth School of Business, says that's useful news for investors.

Professor RANDALL KROSZNER (University of Chicago): I think it's valuable that the chairman gave a little bit more information about what he meant by extended period and that it would mean at least two meetings. That's about 12 weeks. That's about three months. So that's a useful signal to the market. That's probably the most newsworthy thing that happened.

YDSTIE: At the end of his historic press conference, Chairman Bernanke offered some sympathy to Americans suffering from economic woes.

Mr. BERNANKE: The combination of high unemployment, high gas prices and high foreclosure rates is a terrible combination. A lot of people are having a very tough time. So I can certainly understand why people are impatient.

YDSTIE: But the Fed chairman offered little hope of additional stimulus to further speed the recovery. That's not likely to give much consolation to the millions of Americans who remain unemployed. For many, their future is coldly predicted in the Fed's forecast for unemployment. It projects an unemployment rate still around 7 percent two and a half years from now.

John Ydstie, NPR News, Washington.

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