Federal Reserve Board chairman Ben Bernanke has opened the door to speculation about his future at the central bank, revealing that he has discussed the matter with U.S. President Barack Obama and indicating that he feels no personal obligation to lead the ultimate unwinding of the Fed’s extraordinary bond-buying program.
The revelation by Mr. Bernanke comes at particularly tricky time for the Federal Reserve, and immediately triggered questions about policy under a new chairman.
Federal Reserve policy makers said Wednesday that the economic outlook for the United States is getting better, but is not yet strong enough to ease up on their efforts to stoke growth.
All but one of the Federal Reserve’s policy committee’s 12 voting members endorsed leaving the benchmark interest rate near zero and carrying on with plans to create $85-billion (U.S.) a month to purchase bonds, a strategy known as quantitative easing.
Mr. Bernanke previously has dodged questions about his future, but on Wednesday acknowledged at a press conference in Washington that he has spoken with Mr. Obama about his future. He provided no details.
His comment will add heat to what had been idle chatter about his future past Jan. 31, 2014, when his current four-year term as Fed chairman is scheduled to come to an end.
Timothy Geithner and Lawrence Summers, two former treasury secretaries, and Janet Yellen, one of Mr. Bernanke’s most senior deputies at the Fed, are the names most often mentioned as potential successors.
There is a feeling in Washington that eight years at the head of the Fed could be enough for Mr. Bernanke, especially since those years have coincided with one of the most tumultuous periods in the central bank’s history.
Never before has a Fed chairman overseen the dropping of the benchmark rate to zero, and never before has a Fed chairman overseen the creation of hundreds of billions of dollars to purchase financial assets. Mr. Bernanke has done both, overcoming resistance within the Fed, and facing down critics on Wall Street and Capitol Hill, as he orchestrated a response that probably kept the Great Recession from becoming a depression.
But as the Fed made clear Wednesday, there still is work to do. Policy makers lowered their forecast for the unemployment rate in 2013 to between 7.3 and 7.5 per cent, an improvement from December, when the range was 7.4 to 7.7 per cent. The policy-making committee said in its statement that the economy had returned to “moderate” growth after a pause at the end of 2012, led by household spending, business investment and a resurgent housing market.
Yet the U.S. economy has a long way to go. The Fed’s new best-case scenario for the unemployment rate still would be well in excess the central bank’s unofficial target of roughly 5.5 per cent. Thirteen of the 19 officials who take part in the policy committee’s deliberations predict the benchmark will have to stay at zero until 2015.
The end of quantitative easing could come sooner. The Fed says it will create money to buy bonds until the outlook for the labour market improves “substantially.” Mr. Bernanke acknowledged Wednesday that recent hiring data has been encouraging, but said he wanted more proof that the trend was lasting. In a slight shift, he said the Fed eventually could adjust its monthly purchases to match changes in the economic backdrop, tapering purchases if the indicators are strong, or buying even more bonds if the economy takes a turn for the worse.
Eventually, though, that stockpile of financial assets must be unwound, a process that risks stirring up turmoil in financial markets.
But Mr. Bernanke said it need not be him who leads the Fed back to a more normal policy setting. Asked directly whether he felt he had a personal obligation to finish what was started under his leadership, Mr. Bernanke said: “I don’t think that I’m the only person in the world who can manage the exit.”
And then he drew a distinction with his predecessor, Alan Greenspan, who came to personify the Fed over a tenure that lasted 19 years.
“One of the things I hoped to accomplish, and was not entirely successful at, as the governor, or the chairman of the Federal Reserve, was to try to depersonalize to a certain extent monetary policy and financial policy and to get broader recognition of the fact that this is an extraordinary institution,” Mr. Bernanke said.