US Fed chief Bernanke defends monetary easing against global criticism

The head of the US Federal Reserve on Sunday defended the central bank’s monetary easing measures after criticism that stimulus was to blame for destabilising capital flows around the world.

Ben Bernanke said the trillions of dollars that the Fed has pumped into the world’s biggest economy in recent years was not only aimed at stoking growth at home, but also helping the wider global economy recover.

“The Federal Reserve is providing additional monetary accommodation to achieve its dual mandate of maximum employment and price stability,” Bernanke said in prepared remarks at the annual meetings of the International Monetary Fund and World Bank in Tokyo.

“This policy not only helps strengthen the US economic recovery, but by boosting US spending and growth, it has the effect of helping support the global economy as well.”

The central banker said “beneficial effects” of the bank’s policies should be given “appropriate weight”, and argued there was a weak link between rich countries’ policy moves and capital flows across national borders.

“The linkage between advanced-economy monetary policies and international capital flows is looser than is sometimes asserted,” he said.

Critics, particularly in emerging nations, have argued that easing measures help drive down the dollar – making US exports comparatively cheaper – while causing huge capital flows to spill across their borders and putting pressure on their own currencies.