Federal Reserve Chairman Ben S. Bernanke met with Senate Banking Committee members on Capitol Hill today, in what two congressional aides said was a briefing on the Fed’s latest round of monetary stimulus.
The meeting started around noon and 10 senators, including Republicans Richard Shelby of Alabama and Bob Corker of Tennessee, were seen entering the committee room. The session was held behind closed doors.
U.S. central bankers voted Nov. 3 to inject another $600 billion of reserves into the banking system through purchases of U.S. Treasury debt in an effort to steer the economy away from deflation and support growth. The second round of purchases followed a previous $1.7 trillion program.
The move prompted a political backlash among Republicans. Senator Corker and Representative Mike Pence of Indiana held a joint press conference yesterday on their proposal to remove the Fed’s full employment mandate and focus the central bank on stable prices alone.
By “restraining the Fed and giving clarity to its mission focused singularly on sound monetary policy, we can avoid future short-term fixes that have long-term inflationary consequences,” Pence said yesterday.
Economists such as Douglas Holtz-Eakin, former Congressional Budget Office director, and John Taylor, a Stanford University professor and former Treasury Undersecretary, said the Fed program should be “discontinued” in an open letter to Bernanke Nov. 15.
The Fed chairman has the benefit of weak inflation data today to explain his position.
The consumer-price index increased 0.2 percent in October, less than forecast by economists, after a 0.1 percent rise the prior month, the Labor Department said today in Washington.
Excluding food and fuel, so-called core costs increased 0.6 percent from October 2009, the smallest gain on record. U.S. housing starts fell 12 percent last month to a 519,000 annual rate, the fewest since a record low reached in April 2009, the Commerce Department said today.
Federal Reserve spokeswoman Michelle Smith declined to comment. Sean Oblack, spokesman for the Senate Banking Committee, wasn’t immediately available for comment.
To contact the reporters on this story: Craig Torres in Washingtont .
Bernanke and the Fed doves are not stupid, but they think the rest of us are. It's not that they are unaware of real inflation, and they know that the larger QE1 didn't help unemployment. I suspect their reason for going ahead with QE2 is Wall St influence and likely the desire to devalue the dollar to enable debtors to cheat lenders while disavowing that.
Debtors cheating lenders is right on.The lenders are lending at 2.4 to 3.5% but the dollars they are getting paid back with have depreciated 10% over the past six months.When and if the lenders wise up I wouldn't want to be long the TLT.
Watching Kudlow last night, he had a senator on after this closed door meeting.
I think reading between the lines, the purpose of this meeting was for Bernanke to read these guys the riot act.
He is taking the abuse when they have left him no choice.
They expect the market to absorb $140 billion a month in debt without paying through the nose with yield?
So far each time Bernanke has bought treasuries long term yields have risen.The message of the treasury bond market is,"treasury market to Bernanke you can't control or manipulate us".Sooner or later,hopefully soon Bernanke will get and understand that message.