WASHINGTON, May 22 (UPI) -- U.S. Federal Reserve Chairman Ben Bernanke said current monetary policy provides "significant benefits" to the economy, but then hinted of possible changes.
In a prepared statement presented to the House-Senate Joint Economic Committee, Bernanke said current policies are nudging the economy forward and the central bank's policy makers are keeping an eye on risks.
He also said, "withdrawing policy accommodation at this juncture would be highly unlikely to produce such conditions," referring to a recovery that allowed for higher interest rates.
"In the current economic environment, monetary policy is providing significant benefits," he said.
However, in the question and answer period that followed his remarks, Bernanke said the Fed could "step down" it quantitative easing program, which currently amounts to purchases of $85 billion per month in long-term treasuries and mortgage-backed securities.
"In the next few meetings, we could take a step down in our pace of purchase," he said.
U.S. markets turned quickly on the news with early gains fading and equity markets closing lower.
Bernanke, in his prepared statement, expressed concern about the slow recovery in the labor market but said "low real interest rates have helped support spending on durable goods, such as automobiles, and also contributed significantly to the recovery in housing sales, construction and prices. Higher prices of houses and other assets, in turn, have increased household wealth."
Before Bernanke testified Wednesday, Republican lawmakers charged he purposely withheld strategic information from them because minutes of the central bank's most recent policy hearing were not to be released publicly until after his appearance on Capitol Hill.
In his prepared remarks, Bernanke focused on the economy and left out any commentary on whether or not he had snubbed lawmakers.
House Oversight Committee Chairman Darrell Issa, R-Calif., and committee member Jim Jordan, R-Ohio, told Bernanke in a letter a month ago they were frustrated by his lack of response to a February demand for documents detailing the bank's strategy on buying and eventually selling more than $3.3 trillion in bonds and other assets.
The central bank has purchased the mortgage-backed and treasury securities as part of its easy-money stimulus programs to boost economic growth. The bonds purchase is known as "quantitative easing," an unconventional monetary policy central banks use to stimulate economies when standard monetary policies don't work.
The lawmakers said they wanted to know the Fed's quantitative easing buying plans, and they wanted to make sure the Fed's plans for selling the assets don't hurt the U.S. economy.
The lawmakers said in their April 22 letter Bernanke "willfully" withheld public and non-public documents the committee requested, The Wall Street Journal reported.
"The American people have a right to know the true risks associated with the expansion of the Federal Reserve's balance sheet," the lawmakers wrote. "The Fed's obstruction and lack of transparency must stop."
The committee told Bernanke if the Fed did not provide all the material it demanded by May 6 it would consider using its subpoena power to get the materials.
When the Fed acknowledged receiving the letter it simply said the central bank would respond to Issa and Jordan. It was not immediately clear what, if anything, happened May 6.
Bernanke met privately with Issa and other lawmakers last week to discuss the quantitative easing strategy, people who attended the meeting told Politico Tuesday.
The participants declined to disclose what Bernanke told lawmakers, other than saying he discussed the bond-buying programs and other issues. A Fed spokesman declined to comment.
The markets have been speculating the Fed could start to gradually cut back on quantitative easing.
But Federal Reserve Bank of St. Louis President James Bullard said Tuesday the Fed should press on with quantitative easing but be willing to change the amount of securities the Fed buys to reflect unpredictable economic currents.
Bullard told Germany's Goethe University Frankfurt the U.S. "recovery from the financial crisis and the ensuing recession has been slower than expected" and pointed out "Europe has returned to recession." He said "inflation has recently been below target in both the U.S. and Europe."
U.S. inflation is well under the Fed's 2 percent official target and may go lower, economists forecast.
