Bernanke: More securities purchases by the Fed could help the economy

Fed boss: More securities buys could help economy

PROVIDENCE, R.I. — Federal Reserve Chairman Ben Bernanke said Monday that the economy could be helped by another round of asset purchases by the central bank.

Bernanke’s comment reinforces analysts’ beliefs that the Fed is likely to take action at its next meeting Nov. 2-3.

The Fed is considering launching a new program to buy government debt, a move aimed at driving down rates on mortgages, corporate loans and other debt. It’s wrestling with how much it should buy.

“I do think the additional purchases — although we don’t have the precise numbers for how big the effects are — I do think they have the ability to ease financial conditions,” Bernanke said during a town-hall style meeting here with college students.

During the recession, the Fed ended up buying a total of roughly $1.7 trillion of mortgage securities and debt, as well as government bonds. Bernanke called that “an effective program.”

At its Sept. 21 meeting, the Fed signaled that it stands ready to take additional action if the recovery weakens.

Bernanke and other Fed officials have suggested that the Fed’s next likely step to help the economy is buying more government debt. The goal: get Americans to boost their spending, which would strengthen the economy and make businesses more inclined to increase hiring.

An idea gaining favor is for the Fed to start with a modest amount — perhaps $100 billion or less — and then decide on a meeting-by-meeting basis how much, if any, additional debt should be purchased.

Brian Sack, executive vice president at the Federal Reserve Bank of New York, said in a speech Monday that he also sees a benefit in another round of asset purchases.

“The evidence suggests that the expansion of the securities portfolio to date has helped to foster more accommodative financial conditions, and further expansion would likely provide additional accommodation,” he said.