By Peter Schroeder - 11/19/10 02:23 PM EST
Federal Reserve Chairman Ben Bernanke on Friday suggested Congress could lend a helping hand in jumpstarting the economy.
Bernanke did not delve into specific policy recommendations during a speech Thursday, citing the Fed's position as a nonpartisan body, but he said a combination of immediate and long-term measures could spur growth in the U.S. and boost confidence.
"There are limits to what can be achieved by the central bank alone," he said at the Sixth European Central Bank Banking Conference in Frankfurt, Germany.
Bernanke warned that millions of workers in the U.S. could be unemployed or underemployed for "many years" on the current economy trajectory, an outcome he called "unacceptable."
Policies focused on reducing the nation's deficit would be "an important complement to the policies of the Federal Reserve," Bernanke said.
The Federal Reserve chairman also defended the central bank's decision to buy $600 billion of Treasury bonds by the middle of next year in an effort to boost lending.
"In taking that action, the Committee seeks to support the economic recovery, promote a faster pace of job creation, and reduce the risk of a further decline in inflation that would prove damaging to the recovery," Bernanke said. "The evidence suggests that asset purchases can be an effective tool; indeed, financial conditions eased notably in anticipation of the Federal Reserve's policy announcement."
Several Republicans criticized the action, saying it wouldn't help the economy and would only devalue the dollar and create inflation.
Bernanke said the Fed will conduct the bond buying in a "measured and responsive" way and adjust it as needed to meet its objectives.
"Importantly, the Committee remains unwaveringly committed to price stability and does not seek inflation above the level of 2 percent or a bit less that most FOMC participants see as consistent with the Federal Reserve's mandate," he said.
And when it comes to concerns about the devaluation of the dollar, Bernanke said the Fed's efforts are aimed at protecting the "strong economic fundamentals that underpin the value of the dollar" by working to resume robust economic growth in the U.S.
"The dollar's role as a safe haven during periods of market stress stems in no small part from the underlying strength and stability that the U.S. economy has exhibited over the years," he said.
Furthermore, Bernanke said the Fed has taken steps to ensure it will be able to exit the buyback program at the appropriate time and is developing tools to allow it to "drain or immobilize" the bank reserves as needed to ensure a smooth withdrawal.