December 12, 2012
BBBen S. BernankeDecember 12, 2012 FOMC Press Conference
- The chair said that about 5 million people, more than 40 percent of the unemployed, have been jobless for six months or more.
- The chair stated that the 6.5 percent unemployment threshold is not the FOMC’s longer-term objective, with the central tendency of participants’ estimates of the longer-run normal unemployment rate at 5.2 to 6.0 percent.
- The chair said that reaching the unemployment threshold would not automatically trigger a rate increase, and the FOMC might judge an immediate increase inappropriate if inflation and inflation expectations were subdued.
- The chair noted that the change in forward guidance from date-based to threshold-based did not imply any change in the expected path of the federal funds rate, with the threshold not expected to be reached before mid-2015.
- The chair said that the fiscal cliff is already affecting business investment and hiring decisions by creating uncertainty, and that participants likely assumed an intermediate resolution with some fiscal drag but not the full cliff.
From the opening statement
Press conference
CHAIRMAN BERNANKE. Good afternoon.
It’s been about three and a half years since the economic recovery began. The economy continues to expand at a moderate pace. Unfortunately, however, unemployment remains high. About 5 million people—more than 40 percent of the unemployed—have been without a job for six months or more, and millions more who say they would like full-time work have been able to find only part-time employment or have stopped looking entirely. The conditions now prevailing in the job market represent an enormous waste of human and economic potential. A return to broad-based prosperity will require sustained improvement in the job market, which in turn requires stronger economic growth. Meanwhile, apart from some temporary fluctuations that largely reflected swings in energ y prices, inflation has remained tame and appears likely to run at or below the Federal Open Market Committee’s (FOMC’s) 2 percent objective in coming quarters and over the longer term.
Against a macroeconomic backdrop that includes both high unemployment and subdued inflation, the FOMC will maintain its highly accommodative policy. Today the Committee took several steps. First, it decided to continue its purchases of agency mortgage-backed securities (MBS), initiated at the September meeting, at a pace of $40 billion per month. Second, the Committee decided to purchase longer-term Treasury securities, initially at a pace of $45 billion per month, after its current program to extend the average maturity of its holdings is completed at the end of the year. In continuing its asset purchases, the Committee seeks to maintain downward pressure on longer-term interest rates and to keep financial conditions accommodative, thereby promoting hiring and economic growth while ensuring that inflation