UPDATE 1-Bernanke says Fed not trying to spark inflation

By Pedro Nicolaci da Costa

JEKYLL ISLAND, Ga., Nov 6 (BestGrowthStock) – The Federal Reserve
is trying to help a weak economy with its new $600 billion bond
purchase plan, not jump-start inflation, central bank chairman
Ben Bernanke said on Saturday.

“We’re not in the business of trying to create inflation,
our purpose is to provide additional stimulus to help the
economy recover and to avoid potentially additional
disinflation, which I think we all agree could also be
worrisome,” Bernanke said.

He was speaking alongside former top Fed officials Alan
Greenspan and Gerald Corrigan at an event commemorating the
100th anniversary of a meeting on Jekyll Island that led to the
creation of the U.S. central bank system.

With an economy that is growing at just a 2 percent
annualized clip and a jobless rate that remains stagnant at 9.6
percent, the Fed this week decided to provide a fresh, if
controversial, push to the anemic recovery.

Bernanke sought to quell controversy about the Fed’s
unconventional approach to policy, saying asset purchases would
work to boost growth in much the same way that pushing down
interest rates usually does.

Having already brought rates near zero and bought some $1.7
trillion in government and mortgage bonds during the financial
crisis, the Fed last week launched a new easing push that was
welcomed in financial markets but is seen as controversial by
some economists and politicians.

Opponents argue the policy’s risks, which include possible
asset bubbles and future inflation, are not worth the
benefits.

But Bernanke said the Fed, bound by a dual mandate for low
and stable prices and firm employment, has a duty to provide
any support for the economy that it can at a time when it
appears to be undershooting both of its goals.

“We are committed to our price stability objective. I have
rejected any notion that we are going to raise inflation to a
supra-normal level,” Bernanke said.

“We’ve had a very significant disinflation since the
beginning of the crisis,” he said. “We should not be satisfied
with a situation where we have both a large amount of slack on
the employment side and inflation which is below our generally
agreed upon level and seems to be declining over time. That’s a
signal that more should be done and that was the motivation for
the action taken earlier this week.”

UPDATE 1-Bernanke says Fed not trying to spark inflation