(CNSNews.com) – Federal Reserve Chairman Ben Bernanke said that the central bank does not have a specific target for when it might end its $85 billion-per-month program of quantitative easing, saying only that the Fed will continue to monitor the economy for signs of improvement.
“We do not have a specific target,” Bernanke said Tuesday under questioning from Sen. Dean Heller (R-Nev.) before the Senate Banking Committee.
“The reason is – a couple of reasons – one is as you mentioned is that there are a lot of other things happening in our economy like the fiscal issues that you referred to, but in addition, we are paying very close attention – as a number of you have mentioned – to the efficacy and costs of these policies, and that makes it very difficult to say ‘this is the number we’re going to achieve.’”
Bernanke explained that the Fed was instead trying to communicate to the market why it was continuing its policy of monetary easing instead of trying to pinpoint a goal. He said that the Fed looked at the unemployment rate along with measurements of how effective the policy is versus how much it costs.
“We have not been able to come to a specific number which encapsulates both the changes in the labor market and the assessment of costs and efficacy which is another part of the decision process.”
In other words, the Fed does not have either a cost or unemployment goal in mind that would cause it to stop pumping $85 billion per month into the economy. Rather, it will weigh the economic growth spurred by pumping money into the economy with the costs to the economy of doing so.
Once the Fed no longer feels it is getting a worthy amount of bang for its buck, it will end its easing policies.
The policy, announced in September 2012, is aimed at pumping billions of dollars per month into the economy in the hopes of spurring economic growth and lowering unemployment. However, the Fed realizes that printing billions of new dollars each month could raise inflation rates in the future, which is what Bernanke means by weighing the benefits of lower unemployment with the costs of possibly higher inflation.