WASHINGTON — Federal Reserve Chairman Ben Bernanke Thursday signaled an explicit willingness to use monetary policy to combat unemployment, stressing that the Fed would not be "premature in removing accommodation, even after the unemployment rate moves down decisively."
Responding to questions from reporters during his now quarterly press conference, Bernanke noted that the further action would be contingent on a visible improvement in the economy.
He also promising additional action -- either in the form of open-market purchases or through expanded communications -- if the jobs market did not show progress.
"We're looking for something that involves unemployment coming down in a sustained way," Bernanke said during the conference. "Not in a rapid way, but we'd like to see an economy strong enough to support a steadily improving labor market."
This point was reiterated in Bernanke's prepared remarks: "We will be looking for the sort of broad-based growth in jobs and economic activity to signal sustained improvement in labor market conditions and sustaining employment."
This suggests a shift from previous policy statements by the Federal Open Market Committee, which had made open-market purchases without explicitly committing to further purchases if the unemployment rate did not improve.
Bernanke would not specify any single metric that the FOMC would use to gauge the strength of the economy and the corresponding level of monetary accommodation, noting that the committee had not yet agreed on any single indicator.
The chairman also repeated in stronger terms that monetary policy could not have a substantial impact on the unemployment rate without action from other policy makers.
"We're looking for policy makers in other areas to do their part," Bernanke said. "We can't solve this problem by ourselves."
Bernanke was also repeatedly asked by reporters about what other tools the Fed has at its disposal in the event that the latest round of purchases does not materially affect the economy.
He would not identify tools other than additional purchases of Treasuries and mortgage-backed securities and Fed communications, though he mentioned that there were "a number of possibilities."
Responding to a question regarding inflation, Bernanke stated that the Fed was not committing to tolerance of higher inflation than indicated by the explicit target of 2.0%. He also noted that if inflation were to rise while unemployment was still unacceptably high, then the Fed would take a "balanced approach" to policy that could account for both inflation and unemployment.
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