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Bernanke signals continued support for low rates

Published on NewsOK Modified: February 26, 2013 at 12:44 pm •  Published: February 26, 2013

Addressing concerns that the bond purchases, which have pushed the Fed's balance sheet to a record high above $3 trillion, could trigger high inflation, Bernanke said:

"Inflation is currently subdued and inflation expectations appear well-anchored. We do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more-rapid job creation."

He said that over the past six months, the economy has grown moderately but unevenly. Bernanke said the pause in growth seen in the final three months of 2012 "does not appear to be a stalling-out of the recovery." He said growth appears to have picked up in the past two months.

Shortly before the Fed chairman spoke, several reports pointed to surprising economic strength: Americans' confidence in the economy rebounded this month, new-home sales jumped in January to the highest level since 2008, home prices rose at a healthy pace in December compared with a year ago and profits of U.S. banks jumped last quarter to the highest level in six years.

Bernanke was asked whether the Fed's bond buying could push its balance sheet to $4 trillion. He said that it has no target for how much in bonds it plans to buy.

He noted that the Fed's balance sheet is less than that of the Bank of Japan, which has battled for more than two decades to strengthen the sluggish Japanese economy.

Asked about possible threats to the U.S. economy from Europe's financial crisis, including new fears about Italy, Bernanke said that the exposure of American banks to Italy's debt was small.

He said a bigger threat could emerge if investors grew worried that the debt crisis might suddenly be worsening. He doesn't foresee such a threat, Bernanke said.