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Federal Reserve Chairman Ben Bernanke told Congress Tuesday that the central bank was confident it could manage the risks from its expanded quantitative-easing stimulus program.
"Highly accommodative monetary policy also has several potential costs and risks," he told a Senate panel. But the Fed policy board "remains confident that it has the tools necessary to tighten monetary policy when the time comes to do so."
Bernanke said the $85 billion a month bond-buying program, known as QE3 and aimed at holding down long-term interest rates to aid growth, was "providing important support to the recovery" while keeping inflation at bay.
The low-rate policy has boosted the housing market and the production and sales of automobiles and other durable goods, and stimulated the jobs market, he argued.
He said the Fed was keeping a close eye on signs of risky behavior arising in the financial system due to the prolonged low-rate environment, a worry that was expressed in January by some members of the Federal Open Market Committee, the Fed's policy board.
However, he said, "to this point we do not see the potential costs of increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more job creation."