Photo: flickr / Medill DC
Day two of Federal Reserve Chairman Ben Bernanke’s semi-annual Congressional testimony on monetary policy is now over.Today, Bernanke went before the House Financial Services Committee.
Yesterday, in a testimony before the Senate banking committee, Bernanke sought to downplay concerns over the size of the Fed’s balance sheet, largely as expected. He told senators that the benefits of quantitative easing outweigh the costs and that stocks don’t appear overvalued at these levels.
During the Q&A session with the House Committee today, Rep. Maxine Waters asked Bernanke about the effects of sequestration. Bernanke replied, “My suggestion for your consideration is to align the timing better with the problem.” Here, he was referring to short-term fiscal spending cuts to deal with long-term debt sustainability issues. “I would be supportive of a less front-loaded set of measures,” he said.
When asked about the effect of negative deposit rates, Bernanke said that cutting the interest rate on excess reserves held by banks at the Fed to a level below zero would have a positive effect on the economy, but only a very small one. Furthermore, it could have negative effects on the functioning of money markets.
Bernanke also stated that 2016 was a reasonable estimate for how long it would take to reach a 6 per cent unemployment rate.
Little else of note came out of today’s testimony before the House Committee. Stocks drifted higher throughout Bernanke’s speech, although there weren’t any market-moving headlines.
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