The US Federal Reserve Chairman Benjamin Bernanke urged lawmakers to quickly resolve the nation's fiscal cliff, warning late Wednesday if it is not resolved there will be little the central bank can do to offset the effects.
Bernanke said at a news conference after the Fed announced another round of bond buying to spur growth, it was "critical that fiscal policymakers come together" to deliver a package of spending cuts and tax revenue increases that would help lower the deficit without stalling the recovery.
He acknowledged that the Fed would try to do what it could to offset the negative consequences for the economy if it did go over the fiscal cliff, and would "perhaps increase a bit" the support that it was able to provide businesses and households.
"But I just want to again be clear, that we cannot offset the full impact of the fiscal cliff. It is just too big, given the tools that we have available, and the limitations on our policy toolkit at this point," he said.
The US central bank announced it would keep buying USD 85 billion of Treasury and mortgage-backed bonds a month until it saw a substantial improvement in the outlook for the labor market. Its balance sheet would increase to almost USD 4 trillion by the end of next year if it kept up that pace of purchases.
The Fed cut interest rates to near zero nearly four years ago. The US central bank has already bought about USD 2.4 trillion in securities to drive other borrowing costs lower.