Bloomberg News

Bernanke Tells Senators Fed Securities Purchases Helped Create Employment

March 01, 2012

Ben Bernanke at the House Financial Services Committee on Capitol Hill on Feb. 29, 2012. Photographer: Luke Sharrett/The New York Times/Redux

Ben Bernanke at the House Financial Services Committee on Capitol Hill on Feb. 29, 2012. Photographer: Luke Sharrett/The New York Times/Redux

Federal Reserve Chairman Ben S. Bernanke defended the central bank’s expansive monetary policy, telling a Senate hearing that it helped create jobs and stabilize prices.

“We’ve had about 2.5 million jobs created,” since November 2010, when the Fed started its second round of large- scale securities purchases. “We’ve seen big gains in stock prices, improvement in credit markets.”

Bernanke, 58, sought to justify policies that have come under growing scrutiny from Republicans in Congress and on the campaign trail. Presidential candidate Mitt Romney has said he wouldn’t give Bernanke another term as chairman, and lawmakers, including Senate Minority Leader Mitch McConnell and House Speaker John Boehner, sent Bernanke a letter in September asking him to “resist further extraordinary intervention” in the economy.

“If you look back at quantitative easing two, so-called, in November 2010, the concerns at the time were that it would be highly inflationary, it would hurt the dollar, that it would not have much effect on growth,” Bernanke said today in response to a question from Senator Robert Menendez, Democrat of New Jersey, during testimony before the Senate Banking Committee.

“I think the record is positive,” Bernanke said. “Looking back, I think that those actions played a constructive role,” he said.

Deflation Threat

The Fed decided in November 2010 to purchase an additional $600 billion in longer-term Treasury securities to ward off a threat of deflation. The personal consumption expenditures price index, minus food and energy, rose 0.9 percent that year. In January, the index was up 1.9 percent from a year earlier.

The actions helped bring the economy back to a “more stable inflation environment,” Bernanke said.

The Standard & Poor’s 500 stock index is up about 16 percent since Nov. 1, 2010. The index rose 0.6 percent today in New York to 1,374.09. Yields on U.S. 10-year notes have fallen to 2.03 percent today from 2.62 percent over the same period.

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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