Fed chief Ben Bernanke says stimulus is not a green light for 'bad fiscal policy' In a broad defence of quantitative easing, whose latest round began last month, the Fed chief said it is not risking future inflation or "monetising" the government's debt through its purchase of Treasury bonds. The Federal Reserve, which will mark its 100th anniversary next year, has embarked on the third major round of an effort to stimulate demand from US consumers and encourage businesses to accelerate their hiring. Its plan to buy $40bn (£25bn) of mortgage-backed bonds a month drew criticism from some Republicans and others that the risks of the policy outweighed any possible benefits. Mr Bernanke defended the more than $2 trillion of stimulus the Fed has tried to inject into the economy, as well as its pledge to keep interest rates at record low levels until 2015. If the Fed decided to raise rates to make it more expensive for the US government to borrow, it would lead to larger deficits because of the higher interest payments required as well as a drop in tax revenues from slowing growth, he said. In a speech in Indiana, Mr Bernanke, whose second term as the head of the Fed ends in 2014, also took issue with the fear among some investors that the bank will have difficulty withdrawing the level of stimulus it has provided. Policy makers will be able to reverse the stimulus "in a deliberate and orderly way," when needed, he insisted. The Fed's policy of buying government and mortgage-backed debt from banks has long been criticised by some in the Republican Party for undermining the dollar and sanctioning reckless fiscal policy. Republican challenger Mitt Romney and Paul Ryan have both taken issue with the policy.