Date
29 March 2017
Fed faces a tough call on interest rates given the recent global economic and market developments, says its former chief Ben Bernanke. Photo: Bloomberg
Fed faces a tough call on interest rates given the recent global economic and market developments, says its former chief Ben Bernanke. Photo: Bloomberg

Fed’s move to hold off on rate hike was ‘reasonable’: Bernanke

The US Federal Reserve’s recent decision to hold off on an interest rate hike was reasonable, the central bank’s former chairman Ben Bernanke said on Wednesday.

In an interview with The Wall Street Journal, Bernanke said he believes it will take a few months to gauge the extent of the impact of global economic and market developments on the US economy.

As Fed officials chose not to move at their meeting last month out of caution over global events and unsettled markets, “the decision they took was reasonable”, Bernanke said.

The rate decision is a “tough call” though not completely out of the realm of what the central bank often has to deal with, the former Fed chief said.

The Fed is scheduled to release Thursday the September policy meeting minutes, which could provide more details about the internal deliberations.

Bernanke is currently on a national tour to promote his new book, a memoir titled “Courage to Act”, which recounts events that took place during the 2008-09 US financial crisis.

Under his leadership, the Fed lowered short-term rates to near zero in December 2008 to help stabilize markets during the crisis.

Officials have held them there since to help support the economy through the recession and recovery.

Fed officials, including current chair Janet Yellen, have been saying they expect to raise rates this year this year because the job market is improving and slack in the economy diminishing.

“We have a pretty good domestic expansion,” Bernanke said in the latest interview. “The household sector, which is driving growth, has been solid for a while.”

The US economy will likely withstand the “drag” being generated by troubles in emerging markets, he said.

But he added that it is also a period of uncertainty and that it could take “a few months” to see how things play out.

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RC

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