Business

Ben: Keep QE till jobless rate is 6.5%

Ben Bernanke, sounding frustrated at the slow pace of the US economic recovery, said the Federal Reserve won’t let up on its stimulus program until the jobless rate falls to 6.5 percent — no matter how long it takes.

The Fed chairman also super-charged the central bank’s $1 billion-a-year purchases of mortgage-backed securities and Treasuries.

“The conditions now prevailing in the job market represent an enormous waste of human and economic potential,” Bernanke said at a press conference yesterday.

Previously, the Fed’s second round of stimulus, or quantitative easing, known as QE2, was set to run until mid-2015.

Its aim is to keep interest rates — especially rates on mortgages — low to help stimulate spending.

Bernanke said the Fed would seek to keep rates low as long as the unemployment rate, now 7.7 percent, remained above 6.5 percent and inflation was projected to be no more than 2.5 percent.

The plan includes purchasing $85 billion of debt a month.

The Fed said it was ending Operation Twist, under which it swapped short-term debt for long-term debt.

Under Twist, the Fed’s balance sheet remained the same. Under its new plan, the debt purchases would expand its balance sheet.

The Dow Jones industrial average, which was hovering at about 13,314 when Bernanke started speaking at 2:15 p.m., slumped when he said no matter how hard the Fed tried, it couldn’t offset the damage that would be done if President Obama and Congress couldn’t reach an agreement to avoid the US economy falling off the fiscal cliff.

The cliff is the automatic spending cuts and tax increases that are set to begin on Jan. 1.

With the dour talk, the Dow gave up all of its advances. It closed down 2.99 points, at 13,245.45.