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Bernanke says Fed stimulus benefits 'clear,' budget cuts a risk

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(Globalpost/GlobalPost)

WASHINGTON, Feb 26 (Reuters) - Federal Reserve Chairman Ben Bernanke strongly defended the U.S. central bank's bond-buying stimulus before Congress on Tuesday, saying its benefits clearly exceed possible costs. The Fed chairman also urged lawmakers to avoid sharp spending cuts set to go into effect on Friday, which he warned could combine with earlier tax increases to create a "significant headwind" for the economic recovery. Bernanke said Fed policymakers are cognizant of potential risks from their extraordinary support for the economy, including the possibility the public loses confidence in the central bank's ability to unwind its stimulus smoothly or the potentially destabilizing effect of low rates on key markets. But he added these did not seem material at the moment, adding the central bank has all the tools it needs to retreat from its monetary support in a timely fashion. "To this point, we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation," Bernanke said in remarks prepared for delivery to the Senate Banking Committee.

http://www.globalpost.com/dispatch/news/thomson-reuters/130226/bernanke-says-fed-stimulus-benefits-clear-budget-cuts-risk