Bernanke says Fed has scope to boost economy

WASHINGTON - US Federal Reserve Chairman Ben Bernanke has said the central bank still has room to provide more stimulus to spur the economy, according to the Fed chief's letter made public on Friday.

"There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery," Bernanke wrote in a letter dated August 22 to Darrell Issa, Chairman of the House Oversight and Government Reform Committee, a copy of which was obtained by Xinhua.

Bernanke mentioned the options of enlarging the central bank's balance sheet, or communicating about the likely future course of monetary policy.

Bernanke noted that expected benefits of the tools need to be balanced against their potential costs and risks when the Fed mulls its further action.

In response to a question about the impact of Operation Twist, a program initially launched last September and extended this June through the end of 2012, Bernanke said the influence of the initial phase of the program is still working its way and the extension of the program is "in the very early phases of having its effect on the economy."

"Because monetary policy actions operate with a lag, the stance of policy must necessarily be set in light of a forecast of the future performance of the economy," he added.

According to the minutes of the Fed's latest policy meeting, many members of the Fed's policy-setting committee judged that additional monetary easing measures would be needed "fairly soon" unless growth substantially strengthens. The language was regarded as a strong signal for new steps to boost the economy.

Bernanke would give speech next week at the annual economic symposium conference in Jackson Hole, Wyoming, which will be closely watched for clues on the Fed's policy intentions.

The Fed's next policy meeting is scheduled for September 12-13.