Ben S. Bernanke has his magic number.
The Federal Reserve, which Bernanke heads as chairman, said it wouldn’t raise the benchmark federal funds interest rate until unemployment falls to at least 6.5 percent from the current 7.7 percent.
Previously, the Fed said it was likely to wait until mid-2015 before raising the Fed funds rate, which currently ranges from zero to 0.25 percent. The shift doesn’t change the timing of when officials believe the economy will be strong enough to grow on its own, but it does tie monetary policy directly to a specific target, even if there is wiggle room for the Fed to think on its feet.
With prices steady even with low interest rates, Bernanke is focused on the job front.
“About 5 million people — more than 40 percent of the unemployed — have been without a job for six months or more, and millions more who say they would like full-time work have been able to find only part-time employment or have stopped looking entirely,” Bernanke said at a press conference. “The conditions now prevailing in the job market represent an enormous waste of human and economic potential.”
Bernanke’s position gives him great sway. And even though Forbes named him the sixth most powerful person in the world this month, the Fed chief said he could only do so much.
Already the Fed is doing more. The central bank said Wednesday it would pump more money into the economy by buying $45 billion in Treasury bonds each month, replacing a program that previously swapped out short-term debt for longer-term obligations.
“Monetary policy has its limits,” Bernanke said. “Only the private and public sectors working together can get the U.S. economy fully back on track.”
Step one is avoiding the fiscal cliff — a term Bernanke coined to describe the potentially toxic combination of automatic tax hikes and spending cuts slated to take effect next month. Bernanke said lawmakers need to both address the issue in a way that does not hurt the recovery and also lays the foundation for a long-term fix.
Although stocks initially gained on the new support for the economy, markets slipped back as investors continued to fret over the fiscal cliff.
Shares in the S&P Retailing Industry Group gained just 0.1 percent, or 0.86 points, to 656.65, as the Dow Jones Industrial Average gave up earlier gains and fell 2.99 points to 13,245.45.
Among the day’s decliners were G-III Apparel Group Ltd., down 6.3 percent to $34.03; Quiksilver Inc., 4.8 percent to $4.01, and Wal-Mart Stores Inc., 2.8 percent to $68.94.