(BLOOMBERG) — Federal Reserve Chairman Ben S. Bernanke defended the central bank’s unprecedented asset purchases, saying they are supporting the expansion with little risk of inflation or asset-price bubbles. Bernanke, speaking before the Senate Banking Committee in his semiannual policy report to Congress, said inflation remains “subdued.” (This is an excerpt. Source: Bloomberg)

“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,” Bernanke said today in testimony to the Senate Banking Committee in Washington. “Inflation is currently subdued, and inflation expectations appear well anchored.”

Automatic federal budget cuts set to begin March 1 will put a “significant” burden on the economy if lawmakers can’t avert the reductions, Bernanke told lawmakers in the first day of his semiannual monetary policy report to Congress. He also urged lawmakers to put the budget on a “sustainable long-run path.”

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