In a 30-minute speech to the Economic Club of Indiana Federal Reserve Chief Ben Bernanke took time to justify recent actions by the Fed to help the economy and warned that calls for more Congressional involvement in its decisions could lead to politicization.
Bernanke said the goal of the Fed was to maximize employment and achieve price stability. He said there was not much more the Fed could do with short-term interest rates, so it was focusing its attention on long-term rates.
He said the Fed recently purchased $85 billion in long-term securities to help keep rates down, and he expected short-term rates to remain low through 2015.
He cautioned that monetary policy was not a panacea for the economy and said the nation needed budgetary,tax and education reform. It also needed to expand international trade and support technological innovation.
Bernanke also argued the fed buying government securities helped ease the budget deficit, because the interest is returned to the U.S. Treasury; $200 billion in the last three years.
Bernanke noted that keeping interest rates low did not drive up the deficit, saying the alternative would be higher rates and that would hurt the economy. He also cautioned keeping politics out of Reserve saying the Fed is audited by an outside independent firm and regularly promotes transparency, saying the Fed’s website has cataloged more than 21,000 transactions and steps taken to stabilize the economy.
You can hear Bernanke’s comments below as well as his Q & A from the audience. There is also reaction to his speech from University of Indianapolis Graduate School of Business Finance Professor Matt Will.
Leon-Tailored Audio - Fed Chief Ben Bernanke - 1 (15 minutes)
Leon-Tailored Audio - Fed Chief Ben Bernanke - 2 (15 minutes)
Leon-Tailored Audio - UIndy Finance Professor Matt Will - (4 minutes)