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Bernanke defends Fed easy money policy

Federal Reserve chief Ben Bernanke appeared before the US Senate Banking Committee on Tuesday to testify on the Semiannual Monetary Policy Report and he declared that the central bank would carry on with its QE programs, as the benefits of further easing outweigh the risks for the US economy.

The Fed head pointed to a recovery on the US housing market and a boost to manufacturing and consumer spending as the main advantages of the easy monetary policy. He stressed however that the risks connected with it would be closely monitored.

Bernanke also referred to the sequester, due to come into effect this week, saying that the US government should find an alternative to it as it poses a significant burden on the economic recovery. He suggested that it should be replaced by “policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.”

As far as the 0.1% drop in US GDP in the fourth quarter of 2012 is concerned, the Fed chief said that it does not “reflect a stalling-out of the recovery” but is merely a temporary effect of some weather disruptions and spending cuts.

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