Outgoing US Fed chairman Ben Bernanke defends record
Federal Reserve chairman credited with guiding US through financial crisis highlights progress but admits unfinished business
United States Federal Reserve chairman Ben Bernanke has reflected on his eight-year tenure at the helm of the US economy, celebrating the central bank's accomplishments but also highlighting what he called "uncompleted tasks".
Bernanke is stepping down at the end of the month after shepherding his country through its worst financial crisis since the Great Depression. He is widely credited with preventing the US economy from free falling, but the lacklustre recovery has led some critics to question whether the Fed is running out of firepower.
In a speech at the American Economics Association conference in Philadelphia, he defended his record and the broader responsibilities that the Fed has shouldered as the bulwark of the US economy.
"The recovery has faced powerful headwinds, suggesting that economic growth might well have been considerably weaker, or even negative, without substantial monetary policy support," he said.
But those headwinds may be abating, he said, leaving the country poised for faster growth.
"The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for US economic growth in coming quarters," Bernanke said
His speech highlighted progress the Fed has made in improving transparency and communications, which Bernanke called one of his principal objectives upon taking office in 2006.
The Fed has set an explicit 2 per cent target for inflation and outlined detailed parameters for when it will consider raising interest rates. In addition, Bernanke has attempted to remove the veneer of mystery from the historically secretive institution, both for the public and on Capitol Hill.
"When I became chairman, I anticipated the obligation to appear regularly before the Congress. I had not entirely anticipated, though, that I would spend so much time meeting with legislators outside of hearings - individually and in groups," he said. "But I quickly came to realise the importance of these relationships with legislators in keeping open the channels of communication."
Bernanke also argued that the Fed has made progress towards safeguarding the US economy from the next crisis. He cited the central bank's "stress tests" of major banks, oversight of the shadow banking system and tighter capital standards as important steps and called for more work on "living wills" that provide a framework for winding down distressed institutions.
"The subsequent efforts to reform our regulatory framework have been focused on limiting the re-emergence of the vulnerabilities that precipitated and exacerbated the crisis," he said.
But the Fed has plenty of unfinished work. Though Bernanke helped the economy avert disaster, he has been repeatedly frustrated by the country's anaemic growth.
He conceded that the Fed was overly optimistic about how long it would take the economy to heal. "The recovery clearly remains incomplete," he said.