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Federal Reserve Chairman Ben Bernanke gave his semiannual monetary report to the House Financial Services Committee followed by a Q&A on Wednesday morning. The market seems to be responding favorably to his comments.

Here are some snippets from his prepared remarks:

  • "Housing has contributed significantly to recent gains in economic activity....Housing activity and prices seem likely to continue to recover, notwithstanding the recent increases in mortgage rates, but it will be important to monitor developments in this sector carefully."
  • "Conditions in the labor market are improving gradually....Despite these gains, the jobs situation is far from satisfactory, as the unemployment rate remains well above its longer-run normal level, and rates of underemployment and long-term unemployment are still much too high."
  • "[I]nflation has been running below the Committee's longer-run objective of 2 percent.... we will act as needed to ensure that inflation moves back toward our 2 percent objective over time."
  • "With unemployment still high and declining only gradually, and with inflation running below the Committee's longer-run objective, a highly accommodative monetary policy will remain appropriate for the foreseeable future."
  • "[W]e intend to continue our purchases until a substantial improvement in the labor market outlook has been realized. In addition, even after purchases end, the Federal Reserve will be holding its stock of Treasury and agency securities off the market and reinvesting the proceeds from maturing securities, which will continue to put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."
  • "We are relying on near-zero short-term interest rates, together with our forward guidance that rates will continue to be exceptionally low... to help maintain a high degree of monetary accommodation for an extended period after asset purchases end, even as the economic recovery strengthens and unemployment declines toward more-normal levels."
  • "[T]he economic outcomes that Committee participants saw as most likely in their June projections involved continuing gains in labor markets, supported by moderate growth that picks up over the next several quarters as the restraint from fiscal policy diminishes. Committee participants also saw inflation moving back toward our 2 percent objective over time. If the incoming data were to be broadly consistent with these projections, we anticipated that it would be appropriate to begin to moderate the monthly pace of purchases later this year. And if the subsequent data continued to confirm this pattern of ongoing economic improvement and normalizing inflation, we expected to continue to reduce the pace of purchases in measured steps through the first half of next year, ending them around midyear. At that point, if the economy had evolved along the lines we anticipated, the recovery would have gained further momentum, unemployment would be in the vicinity of 7%, and inflation would be moving toward our 2% objective."
  • "[B]ecause our asset purchases depend on economic and financial developments, they are by no means on a preset course."

A Q&A session with members of the House Financial Services Committee followed the prepared remarks. Regarding monetary policy, Bernanke mostly reiterated his main points that the Fed will remain "highly accommodative" for quite some time and will watch the data and decide when to taper the amount of bond buying.

Is there anything in Bernanke's comments today that surprised you? Chime in below.

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