Bernanke: Economy still needs Fed stimulus

Federal Reserve Chairman Ben Bernanke said Wednesday the central bank
will likely keep at least some of its easy-money policies going "for
the foreseeable future."

Noting that unemployment is still too high and inflation too low,
Bernanke said, "both sides of our mandate are saying we need to be
more accommodative."

He spoke about Fed policies in a Q&A session after a speech in
Cambridge, Mass., to the National Bureau of Economic Research.this

Bernanke rattled stock and bond markets last month when he said the
Fed likely will reduce its stimulus later this year and end it by
mid-2014, assuming the 7.6% jobless rate falls to 7% by then. The Fed
is buying $85 billion a month in government bonds to hold down
long-term interest rates.

FED MINUTES: Some support for stimulus end in 2013

Financial markets assumed that Bernanke's roadmap also meant that the
Fed likely will raise its benchmark short-term interest rate in late
2014, instead of mid-2015 as anticipated.

But Bernanke reiterated that the Fed won't consider raising short-term
rates until the unemployment rate reaches 6.5%.

The Fed chairman also suggested that policymakers could keep the
bond-buying program at full throttle longer if the economy wobbles.
While the housing market is improving and buoying consumer wealth,
federal spending cuts still could dampen growth, he said. "it's still
too early to say we have weathered the fiscal restraint," he said.

And if interest rates continue to rise in anticipation of Fed actions,
hobbling the economy, "we'll have to push back against that," Bernanke
said.

In his prepared speech earlier, Bernanke says the 2008 financial
crisis showed the Federal Reserve that it must strengthen its approach
to both regulation and interest-rate policies.

Bernanke says the U.S. economy has yet to fully recover from the downturn.

MORE: Read the text of the speech

His speech focused on the Fed's successes and failures in managing the
economy over the past 100 years. Bernanke told the audience he would
not address the Fed's current policies in his speech but that he
expected to be asked about it during a question and answer period.