WORLD> America
Bernanke says more steps needed to stabilize banks
(Agencies)
Updated: 2009-01-13 23:44

The Fed has chopped interest rates from 5.25 percent since September 2007 and has opened a range of lending facilities to stabilize markets and stimulate growth. The US economy has been in recession since December 2007.

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Bernanke said the Fed would make clear its intention to keep the benchmark federal funds rate low for an extensive period to combat the crisis, but stressed that that policy could change if conditions improve.

The Fed's unprecedented expansion of its balance sheet is calibrated to stabilize credit markets, he said. The Fed's strategy does not lend itself to targeting the quantity of excess bank reserves or the monetary base, Bernanke said.

"The Federal Reserve's credit-easing approach focuses on the mix of loans and securities that it holds and on how this composition of assets affects credit conditions for businesses and households," he added.

While there are risks to aggressive easing of monetary policy, Bernanke said inflation is not an immediate concern.

"Overall inflation has declined significantly and appears likely to moderate further," he said.

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