ROBERT SIEGEL, HOST:
A load of information today from the Federal Reserve's policymaking committee, but no action. After a two-day meeting where officials discussed the economy and interest rates, policymakers decided to stand pat. They said, as they've said before, that a stronger economic recovery requires keeping interest rates exceptionally low through 2014. Fed Chairman Ben Bernanke defended that policy in a news conference after the meeting. NPR's John Ydstie reports.
JOHN YDSTIE, BYLINE: Four times each year, Fed policymakers update their forecast for the economy, and the Fed chairman holds a press conference to further explain things. This time around, the forecasts showed a slightly faster growth rate for the economy in 2012, a little more than two and a half percent; slightly higher inflation, close to 2 percent; and a slightly lower unemployment rate, 8 percent or just below. It also indicated that the Fed intends to hold interest rates exceptionally low - near zero - until late 2014.
The statement the committee issued was almost exactly the same as the one issued in March. Chairman Bernanke said despite the slight changes to the forecast, no change in interest rate policy was needed.
BEN BERNANKE: That doesn't mean we might not take further action. We are certainly prepared to take further action. But for the time being, it appears that we are more or less in the right place.
YDSTIE: Chairman Bernanke made it clear that the Fed had not ruled out added stimulus to the economy, including another round of quantitative easing - buying up more government bonds to try to push interest rates lower. But he said there was no reason to do that now. Still, Bernanke said the unemployment rate remains too high.
BERNANKE: The most frustrating aspect, I guess, of the recovery has been that it's - has been that it's been quite slow. And as a result, here we are almost three years from the beginning of the expansion, and the unemployment rate is still over 8 percent.
YDSTIE: If that's the case, the chairman was asked, why not do another round of stimulus to push the unemployment rate down, even if it risks a bit more inflation? The Fed chairman had this response.
BERNANKE: Does it make sense to actively seek a higher inflation rate in order to achieve a slightly increased pace of reduction in the unemployment rate? The view of the committee is that that would be very reckless.
YDSTIE: Bernanke said that's because the added reduction in the unemployment rate would be very small and not worth the risk of setting off another round of inflation. As for dangers to the economy, the committee again pointed to the strains in global financial markets. In his news conference, Bernanke made clear they were talking about Europe's debt problems, but the other looming problem is the scheduled expiration of the Bush tax cuts and the payroll tax break later this year. Unless Congress takes action, the increase in taxes could crush consumer spending and the economic recovery - a scary thought, said Bernanke.
BERNANKE: If no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that there's, I think, utterly no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy.
YDSTIE: A dire warning to the Congress and whoever occupies the White House after the election to find agreement on fixing the nation's finances.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.