Ben Bernanke, the chairman of the Federal Reserve, says the American central bank is prepared to provide additional “economic accommodation” to support economic recovery and to return over time inflation to “levels consistent with our mandate”.
He said: “Given the committee’s objectives, there would appear—all else being equal—to be a case for further action”.
However, Bernanke said the possible costs of quantitative easing must be weighed against the potential benefits of non-conventional policies.
“One disadvantage of asset purchases relative to conventional monetary policy is that we have much less experience in judging the economic effects of this instrument, which makes it challenging to determine the appropriate quantity and pace of purchases and to communicate this policy response to the public. (article continues below)
“These factors have dictated that the FOMC [Federal Open Market Committee] proceed with some caution in deciding whether to engage in further purchases of longer-term securities.”