"A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further.”
Bernanke credited monetary policy for keeping inflation falling further below the Federal Reserve's 2% longer-run objective.
The central bank is buying $45 billion in Treasury bonds and $40 billion in mortgage-backed debt monthly to keep borrowing costs low and to encourage investment, hiring and economic growth.
Bernanke in some ways blamed lawmakers for dragging growth telling them "fiscal policy at the federal level has become significantly more restrictive.
“In particular, the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year.”
Bernanke's quantitative easing program of $85 billion a month will not be cut short in the near future. He denied that the stimulus was causing a new bubble (2008). He leveled the most concern towards long-term unemployment. In April, there were 4.4 million long-term unemployed individuals. Long-term unemployment refers to those jobless for more than 27 weeks. "We are seeing evidence that employers are reluctant to look at people if they have been out of work for a long time." Bernanke did add, however, that he did not think that was an "irreversible problem."
