WASHINGTON Federal Reserve Board Chairman Ben Bernanke on Tuesday detailed efforts by policymakers to bring better clarity to the central bank's monetary policy decision making process.
The outgoing chairman has made transparency of the Fed one of his top proprieties during his eight-year tenure. Bernanke has guided the U.S. central bank in expanding its communication policy at a time when the country has been reeling from a financial crisis that forced the Fed to take extraordinary actions to keep the economy afloat.
"Following the stabilization of the financial system, supporting our economy's recovery from the deepest recession since the Great Depression has required a more prominent role for communication and transparency in monetary policy than ever before," said Bernanke in a speech before the National Economist Club hosted at the U.S. Chamber of Commerce.
The central banker, whose term as chairman expires in January, set out to explain how the Fed has expanded its communication strategy to financial markets and the public since 2008, detailing incremental steps the agency has used to telegraph its plans by using forward guidance.
He also argued that the Federal Open Market Committee's decision at its September meeting to stay the course on its $85 billion monthly asset purchase program was "appropriate and fully consistent" with guidance provided by the committee in months prior.
The committee's decision, he said, came in the face of mixed economic data and ongoing fiscal debates on Capitol Hill, prompting the committee to hold off on changing course.
While Bernanke acknowledged the market's surprise at the decision to delay tapering, he said the Fed's move to postpone reducing its asset purchases "only strengthened the credibility of the committee's forward rate guidance."
The FOMC, the Fed's policy making body, has continued to wait for evidence that job market gains would continue to persist before pulling back on the pace its bond buying program.
Bernanke said policymakers will continue to evaluate the overall progress made in the labor market as well as the prospects of sustained progress before taking any action to wind down its quantitative easing program.
"The FOMC still expects that labor market conditions will continue to improve and that inflation will move toward the 2 percent objective over the medium term," said Bernanke. "If these views are supported by incoming information, the FOMC will likely begin to moderate the pace of purchases."
Since September 2012, when the Fed announced its latest $85 billion monthly bond buying program, the unemployment rate has fallen 0.8 percentage points with 2.6 million job being added to the economy.
Bernanke, who is likely to hand over the reins to Vice Chair Janet Yellen, reiterated that the Fed's asset purchases were "not a preset course" and would be dependent on the committee's economic outlook.
The chairman also echoed another past message that the federal funds rate would likely remain at zero for a "considerable time" even after the Fed begins to taper its asset purchases and well after the unemployment threshold of 6.5% is crossed.