May 22 - Federal Reserve Chairman Ben Bernanke put to rest fears of a near-term pullback on the Fed's aggressive monetary policy, and doesn't think recent stock market gains are fueling a bubble. Bobbi Rebell reports.
The Fed is sticking with the program. Chairman Ben Bernanke, in testimony to Congress, said the Fed's monetary policy is still providing significant benefits to the economy- and pulling in the reigns too quickly would carry substantial risks. SOUNDBITE: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE (ENGLISH) SAYING: "If we see continued improvement and we have confidence that that's going to be sustained then we could in the next few meetings, we could take a step down in our pace of purchases. If we do that, it would not mean that we are automatically aiming towards a complete wind down. Rather, we would be looking beyond that to see how the economy evolves and we could either raise or lower our pace of purchases going forward." When asked if the Fed's purchases would be lowered before the Labor Day holiday, which is September 2nd, Bernanke said "I don't know." He said while it's still tough to get a mortgage, over time as home prices rise, loans will become more accessible. Bernanke also addressed concerns about a stock market bubble: SOUNDBITE: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE (ENGLISH) SAYING: "Major asset prices like stock prices and corporate bond prices are not inconsistent with the fundamentals. For example, it was mentioned earlier that price earnings ratios and the like are fairly normal in the stock market. In addition, in thinking about risks to financial stability, you also have to look at things like leverage, credit growth and other indicators that suggest not only is there some mispricing going on but that mispricing has the possibility of greatly damaging the broader financial system and we are not seeing that at this point." Stocks were choppy while Bernanke spoke- but positive sentiment won out. Douglas Blake, Senior Wealth Manager at Newbridge securities: SOUNDBITE: DOUGLAS BLAKE, SENIOR WEALTH MANAGER, NEWBRIDGE SECURITIES (ENGLISH) SAYING: "The market is responding very favorably to Chairman Bernanke's testimony. Up triple digits in the Dow, pushing against those all time highs and it was basically the best case scenario, from Chairman Bernanke. He basically said that it's too soon to consider tapering off the quantitative easing program that is in place and that while there are signs of progress in the economy there are still a lot of headwinds, and it's not yet time to sound the all clear." And speaking of time- the clock is ticking on Bernanke's term at the helm of the Fed- and when asked about accepting a third term- Bernanke declined to answer.