U.S. Fed chief Bernanke says ‘exit’ strategy essential for dollar confidence
SANTA BARBARA, Calif., Oct 19 (Reuters) – Federal Reserve Chairman Ben Bernanke on Monday said that the performance of the dollar and the U.S. economy will depend on the government’s success in controlling the country’s budget deficit.
“Our policy-makers recognize that we need to develop a fiscal exit strategy that will involve a trajectory toward sustainability,” Bernanke said in response to a question after a speech to a conference hosted by the Federal Reserve Bank of San Francisco.
“That is critically important in order to maintaining confidence in our economy and confidence in our currency. I know that is very well understood in Washington,” he said.
The comments come a day after Bernanke told the conference in introductory remarks that the financial crisis has spotlighted the importance of dealing with global imbalances in trade and capital flows.
“The crisis has … highlighted the need for many policy reforms that range from improving financial regulation to addressing global imbalances,” he said in brief introductory remarks.
U.S. officials have sought to pressure China, which has a massive trade surplus with the United States, to allow the value of its yuan currency to appreciate against the dollar and to foster greater domestic demand in its economy.
That campaign has become more muted during the crisis because of China’s importance as a holder of U.S. government and mortgage agency debt and as an engine of growth in the world economy.
Bernanke did not mention China specifically in his speech.
“The global financial crisis and the recession of the past two plus years have challenged policy makers and economists and has made us keenly aware of the linkages between America, Europe, and Asia,” he said.
(Reporting by Mark Felsenthal; Editing by James Dalgleish) ((Tel: +1-202-354-5820; email: firstname.lastname@example.org))