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Bernanke On the Fed’s Future Economic Initiatives

The ""Federal Reserve"":http://www.federalreserve.gov/ has gone on record again regarding the current state of the U.S. economy. Chairman of the Fed, Ben Bernanke, spoke out recently confirming the organization's commitment to take whatever steps necessary should the nation's economic standing continue its slide.

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Noting the Fed's willingness to make non-traditional decisions and policy changes in light of the country's challenging economy, Bernanke emphasized efforts to fiercely monitor price trends during Wednesday's speech in Cleveland, Ohio. ""If inflation itself falls too low or inflation expectations fall too low, that would be something we'd have to respond to because we don't want deflation,"" Bernanke said.

Elaborating on his initial statements, Bernanke went on to say that he did not feel a critical decline in pricing was imminent at this time, and he also cited the rise of prices to above the 2.0 percent mark, which represents the Fed's established ""comfort zone"" in terms of inflation projections.

Bernanke's key concern throughout his speaking engagement was the high unemployment rate in the U.S. ""We've had close to

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10 percent unemployment now for a number of years, and of the people who are unemployed, about 45 percent have been unemployed for six months or more. This is unheard of,"" he commented.

The Fed has endured criticism lately related to its bond purchases, with detractors expressing concern about future instability and inflation on the heels of unconventional moves. Last week's policy meeting brought forward more unorthodox plans from the Fed, with its announcement that $400 billion in ""U.S. Treasury"":http://www.treasury.gov/Pages/default.aspx securities set to mature within three years will be sold and then replaced with more long-term bonds that carry six to 30 year maturation schedules.

Based on the need to keep interest rates low, which the Fed recently announced it would do until at least 2013, the Fed will also stop the attrition of mortgage-securities from within its portfolio. Bernanke's appraisal of the American economy bordered on controversial at times, with his positive commentary on the behavior of lawmakers in emerging-market countries such as China and India.

Bernanke was explicit with his statements, saying, ""Advanced economies like the United States would do well to relearn some of the lessons from the experiences of the emerging-market economies."" Bernanke's complimentary words toward China were somewhat surprising, given his prior critiques of the nation's tactics; he has previously come down hard on China's efforts to keep its currency at an artificially low value.

Bernanke's speech was delivered as part of the ""Cleveland Clinic's"":http://www.clevelandclinic.org/ideas/ ""Ideas for Tomorrow"" series, but audiences from Capitol Hill to Wall Street took note of his statements. The Fed's chairman also gave specific nods to technological developments and educational initiatives that he feels would benefit the U.S.

About Author: Abby Gregory

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