Federal Reserve chairman Ben Bernanke has insisted that the US central bank’s timetable for scaling back its bond-buying programme is not on a “preset course”, and asset purchases could increase if the economy takes a turn for the worse.
Bernanke’s comments, which pushed up US government bond prices, came just hours after the Bank of England revealed a cooling in demand among its policy-makers for an extension to its £375 billion quantitative easing (QE) programme.
In a bid to drive down borrowing costs and spur investment, the US Fed has been buying $85bn (£55.9bn) of bonds each month, but expects to start easing the pace of purchases this year if the economy improves.
Bernanke sparked a brief but fierce global market sell-off last month when he outlined plans to reduce the QE programme, but yesterday he went out of his way to stress that nothing was set in stone.
Appearing before the House of Representatives financial services committee, he said: “Our asset purchases depend on economic and financial developments, but they are by no means on a preset course.”
The Bank of England is also tipped to hold off from embarking on fresh financial stimulus in the near future after minutes from its latest monetary policy committee (MPC) meeting showed members were unanimous in voting to keep QE on hold this month.
This month’s meeting was the first chaired by new governor Mark Carney and marked the first time since October that all nine members were united on the issue of asset purchases.
Guy Foster, head of portfolio strategy at Brewin Dolphin, said: “The minutes suggest a diminishing appetite for QE and more appetite for other measures. The most obvious suggestion is that Carney has convinced the dovish minority that more aggressive forward guidance is warranted.
“Expectations to this end will build as we approach the August meeting and inflation report. It now looks like some form of explicit guidance on interest rates may be announced.”