Wall Street Poised For Bernanke's Senate Panel Testimony

Federal Reserve Chairman Ben Bernanke continues his two-day monetary policy testimony on Capitol Hill. On Wednesday, the chairman appeared before the House Financial Services Committee.

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Ben Bernanke's second term as Federal Reserve chairman ends this coming January. Today, Bernanke is in front of the Senate Banking Committee. It could be his last report to Congress on the economy and the Fed's interest rate policy, and as always, the financial markets have their ears up.

NPR's John Ydstie has more.

JOHN YDSTIE, BYLINE: The Fed chairman reports separately to each house of Congress twice a year. Yesterday, he told members of the House Financial Services Committee that the Fed remains likely to begin winding down its $85 billion a month bond-buying program this fall. When Bernanke first outlined that idea a month ago, global markets tanked, this time they remained calm.

Maryland congressman John Delaney, a Democrat, asked Bernanke he whether he had seen any economic data might change his mind.

REPRESENTATIVE JOHN DELANEY: Is there any new kind of sector of economic data that causes you to think differently about the economy from what you did a month ago?

BEN BERNANKE: No. Our general broad outline is that we expect the economy to pick up probably later this year, that we should see continued improvement in the labor market, unemployment continuing to fall, that general scenario still seems to be correct.

YDSTIE: But, Bernanke reiterated that whether the Fed decides to begin slowing its bond purchases depends on how the economy is actually doing later this year.

BERNANKE: If the data are stronger than we expect, we'll move more quickly. If the data are less strong, if they don't meet the kinds of expectations about where the economy is going, then we would delay that process.

YDSTIE: In fact, Bernanke says if the economy slows significantly the Fed could actually decide to increase stimulus. In any case, he said, even if the Fed begins winding down its bond-buying, the economy will continue to get massive support from its policy of keeping short-term interest rates at historically low levels.

BERNANKE: Our overall policy - including our rate policy - is going to remain highly accommodative.

YDSTIE: In other words, short-term interest rates will likely remain near zero for more than a year.

While he suggested the wind down of the bond-buying program is likely to begin this fall. Bernanke did say there are several risks to the economy that could change the Fed's mind. Among them, a renewed threat of deflation, a greater than expected slowdown in the economy from the across-the-board federal budget cuts, and a congressional battle over the debt ceiling that could derail the economy.

Given that this was possibly Bernanke valedictory appearance, members of the Financial Services Committee were eager to praise him. Chairman Jeb Hensarling, a Texas Republican who has often sparred with Bernanke, called the chairman one of the most able public servant he'd ever met. Democrat Mel Watt of North Carolina said Bernanke had the mystified what the Fed does. Democrat Al Green of Texas didn't want to say goodbye.

REPRESENTATIVE AL GREEN: I trust that this will not be your last visit. I believe that our country has benefited greatly from your service, so I'm hopeful that he'll be back.

YDSTIE: Bernanke has reportedly told friends he'd like to leave and President Obama has indicated it's time. But Bernanke, no doubt, would like to begin to wind down some of the extraordinary programs he's created - rather than place them in the lap of a new Fed chairman.

John Ydstie, NPR News, Washington.

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