WASHINGTON – Quantitative easing is here to stay, according to Federal Reserve Chairman Ben Bernanke, who testified before the Joint Economic Committee Wednesday.
The monetary policy that has flooded the economy with $85 billion dollars worth of treasury bonds over the last couple of months will not be shelved until “economic outlook improves in a real and sustainable way,” Bernanke said.
Bernanke argued that much of the stimulus was overpowered by the effects of sequestration. “A substantial part of this impetus was offset by spending cuts and tax increases by state and local governments,” he said.
The slow pace of GDP growth was another looming factor in Bernanke’s decision not to take any actions to reduce quantitative easing. “Monetary policy does not have the capacity to fully offset an economic headwind of this magnitude,” he said. The Congressional Budget Office estimates that current deficit reduction policies will reduce GDP growth by 1-1/2 percentage points in 2013.
Committee Chairman Kevin Brady, R – Texas, had concerns over the lack of action. “The economy’s in the outpatient room,” he said. “My worry is that the Fed doesn’t have a prescription for what ails the economy.”