Federal Reserve Chairman Ben Bernanke said Wednesday that he sympathized with the frustration of Occupy Wall Street protestors as U.S. jobs market weakness persists and the nation’s unemployment rate remains elevated.
“I fully sympathize with the notion that the economy is not performing as we would like it to be,” Bernanke said during a press conference immediately following the Federal Open Market Committee’s (FOMC) announcement that it will maintain its “Operation Twist” program in place and keep the target range for the fed funds rate at zero to 0.25% because economic conditions are likely to warrant “exceptionally low” interest rates at least through mid-2013.
Bernanke added, however, that protestors’ concerns about action the Fed took during the 2008 financial crisis are “simplistic,” and that the Fed’s intent was not to preserve bankers’ high salaries. “We were trying to stabilize the nation’s financial system,” he said. “Our motives are strictly in the interest of the broad public.”
Also, Bernanke took a dig at Congress, saying he “wished other parts of the government” were more cooperative in helping to solve the economy’s problems. In answer to a question about Republican dissatisfaction with the Fed’s accommodative monetary policy, the chairman said: “Politics is politics and the committee tries to stay out of those debates. We try to keep free of those political pressures.”
“To support a stronger economic recovery and to help ensure that inflation, over time, at levels consistent with the dual mandate, the committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September,” the FOMC announced.
Because rates are already at zero, the FOMC is hoping to encourage growth by maintaining its Operation Twist policy of reinvesting principal payments from its U.S. debt holdings back into agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.
In contrast to the surprisingly divided FOMC policy votes in September and August, Wednesday’s announcement showed only one member voting against the action, the Chicago Fed’s Charles Evans, who supported stronger action to encourage economic growth.
“The Fed left policy unchanged, reaffirming its commitment to Operation Twist,” commented Ian Shepherdson, chief U.S. economist with High Frequency Economics, Valhalla, N.Y., in an analyst note. “The three dissenters from the original Operation Twist vote did not dissent this time. But Chicago Fed president Evans did, because he wants more accommodation.”
The FOMC’s key language citing “significant downside risks” is identical to September’s, but a slightly surprising acknowledgment of better recent data, Shepherdson added.
While the Fed sees household spending having increased at a somewhat faster pace in recent months, “the labor market is still weak, unemployment high and housing depressed,” Shepherdson said. “Again no mention of the rise in core inflation; that is no concern right now. The usual promise to employ tools as needed depending on data but no QE3 hint; Fed is in Twist-and-wait-and-see mode.”
The markets held up during the press conference and announcement, indicating that they had already priced in the Fed taking no new action for now.
Stocks were higher in midafternoon trading, with the Dow Jones industrial average up 162 points, 1.39% higher, at 11,831. The S&P 500 was up 17 points, 1.37% higher, at 1,235.
Read Fed Tackles Long-Term Rates to Spur Economy at AdvisorOne.com.