April 25 - Federal Reserve Chairman Ben Bernanke says the central bank ''would not hesitate'' to launch another round of bond purchases to keep rates low if it looked like the economy needed it, as his group of policymakers ended a two-day meeting by keeping interest rates near zero. Bobbi Rebell reports.
PLEASE NOTE: THIS EDIT CONTAINS 4:3 MATERIAL Fed Chairman Ben Bernanke told reporters the U.S. central bank is keeping rates at close to zero and would not hesitate to launch another round of bond purchases to drive borrowing costs lower, but would only act if the economy needed it. SOUNDBITE: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE (ENGLISH) SAYING: "We will continue to asses, you know, looking at the economic outlook, looking at the risks, whether or not unemployment is making sufficient progress towards its longer run normal level and whether inflation is remaining close to target and if appropriate, and depending also on assessment of the costs and risks of additional policy actions, we remain entirely prepared to take additional balance sheet actions if necessary to achieve our objectives." Which means a third round of unconventional monetary stimulus, known on Wall Street as quantitative easing, or QE3, is not totally off the table; but it's not totally on either. It's a delicate balancing act says Steven Ricchiuto, Chief U.S. economist, Mizuho Securities. SOUNDBITE: STEVEN RICCHIUTO, CHIEF U.S. ECONOMIST, MIZUHO SECURITIES (ENGLISH) SAYING: "He wants to hold out the carrot that if more needs to be done they will certainly step up to the plate to do it but by the same token they don't feel they have any requirements at this particular juncture to execute that transaction and that's why they are not willing to commit. So it's a bit of you know: be careful I'm here, I'm ready if I need to do it, but I can't promise you anything today." Inflation is under control, which is one reason why the Fed does not have to commit. When questioned about inflation, Bernanke said the recent rise in gasoline prices created a temporary bulge that he expects to pass through the system. A greater risk, though, in Bernanke's mind, upcoming tax hikes and spending cuts, which are set to take effect at year's end. SOUNDBITE: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE (ENGLISH) SAYING: "I think it's very important to say that if no action were to be taken by the fiscal authorities the size of the fiscal cliff is such that there is no chance the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy." With that possibility set aside, the number of policy makers predicting rates will start rising in 2014 is higher than it was just a few weeks ago, suggesting a divided Fed is moving closer to that timeline. Bobbi Rebell, Reuters.