WASHINGTON (Reuters) - Below are highlights from Federal Reserve Chairman Ben Bernanke's news conference following the Fed's policy meeting on Wednesday.
BERNANKE ON POSSIBLE TAPER THIS YEAR:
"We have a three-part baseline projection, which involves increasing growth that's picking up over time, as fiscal drag is reduced; continuing gains in the labor market; and inflation moving back towards objective. We are looking to see in the coming meetings ... if the data confirm that basic outlook. If it does, we'll take the first step at some point, possibly later this year, and then continue so long as the data are consistent with that continued progress. And so that basic structure is still in place."
BERNANKE ON LABOR MARKET PARTICIPATION RATE:
"I think there is a cyclical component to participation, and in that respect, the unemployment rate understates the amount of sort-of true unemployment, if you will, in the economy. But on the other hand, there's also a downward trend in participation in our economy, which is arising from factors that have been going on for some time, including an aging population, lower participation by prime-age males, fewer women in the labor force, other factors which aren't really related to this recession.
"Over the last year, the unemployment rate has dropped by eight-tenths of a...point. The participation rate has dropped by three-tenths of a percentage point, which is pretty close to the trend.... I think it would be fair to say most of the improvement in the unemployment rate -- not all, but most of it in the last year is due to job creation rather than lower participation."
BERNANKE ON QE3 NOT PRESET COURSE; WHY FED DIDN'T MOVE:
"Asset purchases are not on a preset course. The Committee's decisions about their pace will remain contingent on the economic outlook and on the Committee's ongoing assessment of the likely efficacy and cost of the program."
"In evaluating whether a modest reduction in the pace of asset purchases would be appropriate at this meeting however, the Committee concluded that the economic data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction. Moreover the Committee had some concern that the rapid tightening of financial conditions in recent months would have the effect of slowing growth ... a concern that would be exacerbated if conditions tightened further.
BERNANKE ON CONDITIONS FOR TAPERING:
"At the meeting concluded earlier today, the sense of the Committee was that the broad contours of the medium-term economic outlook, including economic growth sufficient to support ongoing gains in the labor market and inflation moving towards its objective, were close to the views it held in June.
"But in evaluating whether a modest reduction in the pace of asset purchases would be appropriate at this meeting, however, the Committee concluded that the economic data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction. Moreover, the Committee has some concern that the rapid tightening of financial conditions in recent months could have the effect of slowing growth, as I noted earlier, a concern that would be exacerbated if conditions tighten further."
BERNANKE ON UNEMPLOYMENT, GROWTH RATES:
"At 7.3 percent, the unemployment rate remains well above acceptable levels."
"The downside risks to growth have diminished on net over the past year reflecting among other factors somewhat better economic factors in Europe and increased confidence on the part of households and firms in the staying power of the U.S. recovery."
BERNANKE ON THE LABOR MARKET:
"As I noted earlier, conditions in the job market today are still far from what all of us would like to see. Nevertheless, meaningful progress has been made in the year since we announced the asset purchase program. For example, the unemployment rate has fallen from 8.1 percent at the time of our announcement to 7.3 percent today. And about 2.3 million private sector jobs have been created over the same period."
(Washington newsroom)