Bernanke meets the press, says Fed’s monetary easing not a ‘panacea’ for economy
By Neil Irwin,
For Ben S. Bernanke, the past few weeks have included practicing answers for potential questions from reporters, getting comfortable behind a mahogany desk chosen as a set piece at the Federal Reserve’s first regular news conference, and, oh yeah, deciding what to do at a big meeting to set the nation’s monetary policy.
Members of the press corps who cover Bernanke spent the same period trying to dream up a killer question, asking readers and experts for ideas of what to ask, sweating whether they would get in a question at all. Cable business channels spent the day broadcasting from booths outside the Fed’s headquarters, with countdowns to the chairman’s first news conference ticking on the screen.
When the two sides met Wednesday, under bright lights and with a chorus of clicking cameras — and as Wall Street traders held their breath — the result of all that buildup and hype hit the airwaves. What America saw was a different variety of reality television: a sober and frequently arcane discussion of topics that matter more to Americans’ economic futures than almost anything else on TV.
There were moments in which the Fed chairman made points that would be hard to follow for anyone who hasn’t spent a lot of time studying economics. (“We have seen, for example, in the financial markets, in the indexed bond market for example, or in surveys like the Michigan survey, we’ve seen near-term inflation expectations rise fairly significantly,” he said.)
But Bernanke, a former college professor who frequently subjects members of Congress to the same explanatory skills he used to teach undergraduates, made plenty of points that addressed the core concerns Americans have about the economy. If the first one is a guide, the news conferences, which are to occur quarterly, will offer Bernanke an opportunity to address the latest economic issues in a format suitable for the evening news, not merely to send signals to the financial markets.
“Higher gas prices are absolutely creating a great deal of financial hardship for a lot of people,” Bernanke said, responding to one question. “People need to drive to get to work, so it’s obviously a very bad development to see gas prices rise so much.”
He continued that answer, however, by explaining why he doesn’t think the Fed can do much about it.
“The Fed can’t create more oil,” he said. “We don’t control the growth rates of emerging-market economies. What we can do is basically try to keep higher gas prices from passing into other prices and wages throughout the economy and creating a broader inflation, which would be much more difficult to extinguish.”
The big event took place in a conference room stacked with about 60 reporters and a dozen photographers — more than usual for a Bernanke appearance — and the walls were lined with apprehensive-looking Fed press staff and security. Bernanke sat at the mahogany desk, in a large conference room across from the Fed’s cafeteria, its windows blocked out with blue curtains.
The event followed a two-day meeting of the Fed’s policymaking committee at which the central bank indicated continuity in its strategy. Fed officials also downgraded their expectations for economic growth this year and projected lower unemployment and higher inflation compared with their January forecast.
The Fed will allow a controversial program to buy $600 billion in Treasury bonds, known as the second round of quantitative easing, or “QE2,” to expire as scheduled at the end of June. In its statement, the Fed also maintained its near-zero target for short-term interest rates, where it has been since December 2008, and indicated that it expects to keep rates “exceptionally low” for “an extended period.”
In responding to criticism that the Fed’s monetary easing policy has not done enough to bring down unemployment to sustainable levels, Bernanke said, “We were very clear this was not going to be a panacea.”
Forecasters expect a Commerce Department report scheduled to be released Thursday to show weak first-quarter growth in gross domestic product. They anticipate a 2 percent annual growth rate for the U.S. economy in the first three months of 2011, dragged down by higher fuel prices, winter weather and other factors.
“Most of the factors that account for the slower growth in the first quarter appear to us to be transitory,” Bernanke said.
While the event Wednesday was sometimes described as the Fed’s first news conference, it is more accurate to call it the Fed’s first scheduled news conference. On a Saturday afternoon in October 1979, Fed officials called together reporters in Washington. They sat in the far more formal room where the Fed policymakers meet to make decisions, and Chairman Paul Volcker announced a surprise increase in interest rates.