Washington () US Federal Reserve Chairman Ben S. Bernanke said the economy is barely expanding at a sustainable pace and that it's possible the Fed may expand bond purchases beyond the $600 billion (Dh2.20 trillion) announced last month to spur growth.

"We're not very far from the level where the economy is not self-sustaining," Bernanke said in an interview broadcast yesterday by CBS Corp's 60 Minutes programme. "It's very close to the border. It takes about 2.5 per cent growth just to keep unemployment stable and that's about what we're getting."

Bernanke, in a rare appearance on a nationally broadcast news programme, defended the Fed's efforts to prop up a recovery so weak that only 39,000 jobs were created in November. The unemployment rate last month rose to 9.8 per cent, the highest level since April, the Labour Department said on December 3, three days after the Bernanke interview was taped. Republican lawmakers have said the Fed's policy of "quantitative easing" may do little to help unemployment and may fuel inflation.

"At the rate we're going, it could be four, five years before we are back to a more normal unemployment rate" of about 5 per cent to 6 per cent, Bernanke said. The purchase of more bonds than planned is "certainly possible," said Bernanke, 56.

"It depends on the efficacy of the programme" and the outlook for inflation and the economy.

Bernanke said a return to a recession "doesn't seem likely" because sectors of the economy such as housing can't become much more depressed. Still, a long period of high unemployment could damage confidence and is "the primary source of risk that we might have another slowdown in the economy."

Treasuries rose in Asian trading after the remarks were published, with yields on 10-year notes dipping to 2.97 percent as of 2:38pm in Tokyo from 3.01 per cent at last week's close. The dollar advanced 0.5 per cent to $1.3342 per euro.

The Fed's decision to undertake new bond purchases sparked a political backlash in Washington. The programme, known as quantitative easing, has been criticised by officials in countries including China and Germany. Policy makers in emerging markets expressed concern it would drive down the dollar and cause a surge of capital abroad that created asset-price bubbles.

"Bernanke is defending his decisions to a mass American audience" on the CBS programme, said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. "He is not giving way to criticism, whether it is domestic or international," he said, adding that "it's another reminder that the dollar is a side effect of quantitative easing and not a top factor in the Fed's view."

China criticism

Bernanke in the interview reiterated US complaints that China's policy of limiting gains in its exchange rate is hurting the US economy.

"Keeping the Chinese currency too low is bad for the American economy because it hurts our trade," the chairman said in excerpts of the interview posted on the CBS News website.

"It's bad for other emerging market economies. It's bad for China because among other things it means China can't have its own independent monetary policy."

Sarah Palin, the 2008 vice-presidential candidate who has said she's considering a run for president in 2012, wrote in a November 18 letter to the Wall Street Journal that "It's time for us to ‘refudiate' the notion that this dangerous experiment in printing $600 billion out of thin air, with nothing to back it up, will magically fix economic problems."

Employment mandate

Two Republicans, Tennessee Senator Bob Corker and Indiana Representative Mike Pence, last month proposed removing the Fed's maximum employment mandate to focus the central bank on stable prices alone. Corker plans to introduce such legislation next year.

Bernanke said fears of inflation are "overstated" and that keeping inflation under control isn't a diminished priority for the Fed.

The rate of inflation has slowed this year, with the personal consumption expenditures index, excluding food and energy, rising at a 0.9 per cent annual pace in October, the slowest in 50 years. Including all items, the index increased 1.3 perc ent.

Without action by the central bank, the economy might have tipped into a period of deflation, or a prolonged drop in prices, Bernanke said.