Bernanke plays down easing concerns Ben Bernanke on Tuesday soothed market concerns that the US Federal Reserve will cut short its asset purchases before the labour market improves. Mr Bernanke's dovish testimony to the Senate banking committee clarified the Fed's public stance after minutes of its recent meetings showed that "many" members of the rate-setting Federal Open Market Committee were worried about the costs and risks associated with its third round of quantitative easing, or QE3. Mr Bernanke said that the benefits of asset purchases, running at a pace of $85bn a month, are clear: "Monetary policy is providing important support to the [US economic] recovery while keeping inflation close to the FOMC's 2 per cent objective." The chairman said he took "very seriously" the risk that a prolonged period of low interest rates could damage financial stability, but argued that cheap money lowered risk in other ways. "In the present circumstances [low rates] also serve in some ways to reduce risk in the system, most importantly by encouraging firms to rely more on longer-term funding, and by reducing debt service costs for households and businesses," Mr Bernanke said, adding that the Fed had stepped up its monitoring of the financial system. To this point we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation. The Fed chairman was also cautiously optimistic on the US economy, noting that it has "continued to expand at a moderate if somewhat uneven pace" while "growth has picked up again this year." But Mr Bernanke warned the committee that looming sequestration, or automatic spending cuts scheduled to take effect on Friday, could hurt the economy and called on Congress and the Obama administration to replace them with a longer-term programme of deficit reduction. Against the backdrop of Italy's inconclusive election, which has spooked markets, Mr Bernanke said that "financial stresses are certainly less today than they were over the last two years" but warned that trouble in Europe could still affect the US.