U.S. Federal Reserve chair Ben Bernanke said Wednesday that Fed officials expect a moderate economic recovery to continue through this year after weak growth in the first three months of 2011.
Bernanke spoke at a historic news conference, the first time in the Fed's 98-year history that a chairman has begun holding regular sessions with reporters.
The news conference gave Bernanke a chance to drive a debate about Fed policy.
Critics have said the Fed's efforts to boost growth raise the risk of high inflation. Investors have been seeking clues about when the Fed will start raising interest rates to help slow price increases.
Earlier in the day, the central bank signalled that its $600-billion Treasury bond-buying program will end in June as planned because the economy has strengthened and companies are starting to hire more.
The central bank's monetary policy committee also said once again it would stay with "exceptionally low rates for an extended period of time," suggesting rates will not be hiked anytime soon.
It downplayed inflation risks. It acknowledged a spike in oil prices, but concluded that the pickup in inflation will be temporary.
Asked what "extended period" meant, Bernanke suggested the Fed would take "a couple of meetings" between dropping that wording and actually raising rates, but that would depend on how fast inflation increased.
Ending a two-day meeting, the Fed made no changes to the bond-buying program. The decision was unanimous.
The bond purchases were intended to boost stock prices and lower loan rates, encouraging spending. But critics worried that the purchases would feed inflation.
Even though the bond-buying program is scheduled to end in June, the Fed said it's continuing a separate support program. It's reinvesting about $17 billion a month in proceeds from its portfolio of mortgage securities to buy Treasury debt.
That should help keep rates low on mortgages and other consumer loans.
"Our view," he said, "is that the end of the program is unlikely to have significant effects on financial markets or the economy."
Fed revises forecast
The Fed also released an updated forecast Wednesday for the U.S. economy. It was more upbeat about the prospects for employment for the rest of this year.
The bank projected the economy will grow between 3.1 per cent and 3.3 per cent this year. This was a downward revision from its last forecast, which saw growth possibly as high as 3.9 per cent this year. The new forecast reflects slower growth in the first three months of this year because of higher energy costs.
The Fed's latest outlook foresaw lower unemployment than was expected in January. The unemployment rate, which stood at 9.8 per cent in November, has fallen to 8.8 per cent. The Fed's new forecast projected the unemployment rate will fall to between 8.4 per cent and 8.7 per cent by the end of the year.
The Fed estimated inflation would be between 2.1 and 2.8 per cent by the end of 2011. That was up from its prediction in January of between 1.3 and 1.7 per cent.
Economists think the Fed will start raising rates later this year or early next year.
CIBC World Markets economist Avery Shenfeld said the Fed's view of U.S. economic conditions was "only a shade less optimistic than in March, when it said that growth was on a 'firmer footing' and now only says it is on a 'moderate pace,'" with inflation pressures subdued.
"We continue to see the Fed on hold in terms of overnight rates through 2012," Shenfeld said.
Higher rates would reduce borrowing and spending and make companies less inclined to boost prices.
The Fed has kept its key rate near zero since December 2008.