Wednesday, November 10, 2010

Obama defends Federal Reserve's $600 billion bid to boost economic recovery

The Fed's moves last week have provoked sharp criticism from Germany and other major exporting nations, exposed fault lines within the central bank itself and even drawn Sarah Palin, former vice presidential nominee turned media sensation, to expound on monetary policy.

Speaking at a news conference in New Delhi with Indian Prime Minister Manmohan Singh, Obama stressed that the Fed acts independently from his administration but left little doubt that he has Chairman Ben S. Bernanke's back.

"The Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole," Obama said Monday. "The worst thing that could happen to the world economy . . . is if we end up being stuck with no growth or very limited growth. And I think that's the Fed's concern, and that's my concern as well."

The Fed said last Wednesday that it will buy $600 billion in Treasury bonds over the next eight months in a bid to boost the sluggish recovery by expanding the money supply. The action, known as quantitative easing, is intended to lower long-term interest rates for mortgages and other loans, boost the stock market, and increase inflation to be nearer to the 2 percent level the Fed unofficially targets.

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