Bernake on the Dollar

Farm and Ranch April 28, 2011 A strong dollar can be a negative for U.S. exports, a weak dollar a positive force. During that first ever news conference yesterday by Federal Reserve Chairman Ben Bernake, there was a question about the Fed and the dollar. Bernake was asked to respond to the criticism that Fed policy has driven down the value of the dollar and thereby the U.S. standard of living.

Bernake: “The Federal Reserve believes that a strong and stable dollar is both in American interest and in the interest of the global economy. There are many factors that cause the dollar to move up and down over short periods of time, but over the medium term where our policy is aimed we are trying to do two things. First we are trying to maintain low and stable inflation. Our definition of price stability. By maintaining the purchasing value of the dollar keeping inflation low, that is obviously good for the dollar. The second thing we are trying to accomplish is get a stronger recovery and to achieve maximum employment, and again a strong economy attracting foreign capital is good for the dollar. So in our view, if we do what is needed to pursue our dual mandate of price stability and maximum employment, that will also generate fundamentals that will help the dollar in the medium term.”

Bernake said part of the pressure on the dollar the past two years was from the unwinding of the safe haven effect. Money poured into U.S. treasuries during the financial crisis in the fall of 2008 and it is now moving out.

I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on Northwest Aginfo Net.