"There is scope for further action by the Federal Reserve to ease the financial conditions and strengthen the recovery," Bernanke said in response to a recent letter from Issa that complained of the Fed taking risks for short term gains.
He also said, "because monetary policy actions operate with a lag," the Fed had to be pro-active or make policy "in light of a forecast of the future performance of the economy."
Bernanke said there was not only room for further action, but that Fed actions "helped to promote a stronger recovery than otherwise would have occurred, and to forestall the possibility of a slide into deflation."
The Wall Street Journal reported Saturday that Issa had written to Bernanke, in a letter on Aug. 1, that he was concerned about "the persistent drumbeat of highly reputed academics, former government executives, and market participants, who express grave concern with regard to the actions of the Federal Reserve, its apparent use of monetary policy to generate short term solutions, and the resulting risky balance sheet that weakens the Federal Reserve's ability to withstand the next financial crisis."
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