Federal Reserve chief Ben Bernanke told lawmakers on Thursday it was “too early” to decide whether the Fed can begin to wind down stimulus.
In his second day of semiannual testimony to Congress, the Fed chairman stressed that the central bank would only move to taper the $85 billion-a-month bond-purchase program if the economy appeared strong enough to withstand less support.
Answering questions about expectations that the first taper could come at the Fed’s September policy meeting, Bernanke stressed the uncertainty of the near-term growth outlook in the world’s largest economy.
“I think it’s too early to make judgment. We are looking for a pickup as the year progresses,” Bernanke told the Senate Banking Committee.
He highlighted the drag of sharp US federal spending cuts on growth.
The cuts, which began in March and will slash $85 billion in spending through September, were mandated by the failure of lawmakers to agree on budget deficit reduction.
“One of the reasons that the economy has been so slow is because of fiscal factors. It’s hard to judge how long those factors will last,” he said.
The economy grew at a tepid annual rate of 1.8 percent in the first quarter, following a paltry 0.4 percent expansion in the fourth-quarter of 2012.
Analysts said Bernanke offered the senators no major new revelations compared with his testimony on Wednesday to the House Financial Services Committee.
“The main takeaway from the Fed Chairman’s time with Congress is that Bernanke is in no rush to raise rates and while reducing asset purchases is their intention, there is no preset course for how that could happen,” said Kathy Lien of BK Asset Management.
US Fed chief says 'too early' to decide on stimulus
