'Maintain Low and Stable Inflation' says Fed Chief

Good evening, I'm Christine Tan, and you're watching "Asia Market Daily".

U.S. Federal Reserve Chairman Ben Bernanke has delivered his first ever post-policy-meeting media briefing - ushering in a new era of transparency at the central bank.

CNBC's Steve Liesman was there, and filed this report.

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(SOT) Steve Liesman, CNBC:
Thanks very much, Fed chairman Ben Bernanke in an historic press conference here at the Federal Reserve, telling people that the GDP tomorrow, which he expects to be weak is largely the cause of transitory factors. He also said the spike in inflation is transitory. But the Fed's easy money policy in large part because of long-term unemployment, which he says is a major problem for the United States. I asked him however about the dollar, and here is his response.

(SOT) Ben Bernanke, Chairman, U.S. Federal Reserve:
There are many factors that cause the dollar to move up and down over short periods of time. But over the medium term, where our policy is aimed, we're doing two things. First we are trying to maintain low and stable inflation, by our definition of price stability. By maintaining the purchasing value of the dollar, keeping inflation low. That's obviously good for the dollar.

And the Fed Chairman was asked why not do more quantitative easing. In his response he essentially took QE3 off the table. Or as one economist put it, QE3 is now sunk.

(SOT) Ben Bernanke, Chairman, U.S. Federal Reserve:
The trade offs we're getting are getting less attractive at this point. Inflation has gotten higher, inflation expectations are a bit higher, it's not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we're going to have success in creating a long run sustainable recovery with lots of job growth we're got to keep inflation under control.

The Federal Reserve Chairman said that an extended period of time, which is how long it expects monetary policy to remain easy is at least a couple of meetings, and finally the Fed Chairman told us that inflation and higher oil prices are largely the result of growth in emerging markets not something the Federal Reserve can do anything about. In fact he said the Federal Reserve cannot create any additional oil, back to you.

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Speaking of inflation...

Just this week, Brazil hiked its interest rates to 12.25 percent - as it continued to battle soaring prices.

Brazil blames the U.S. Fed's quantitative easing for its inflation woes. However, it does expect commodity prices to fall post-QE2.

CNBC's Maria Bartiromo spoke to Finance Minister Guido Mantega - and asked him why he thinks there's a currency war going on.

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(SOT) Guido Mantega, Finance Minister, Brazil:
Well, when the financial crisis struck us in 2008, the markets, especially the manufacturing markets ended up shrinking in scale, which in turn, of course, prompted a trade dispute or trade competition among countries. One of the best tools in a trade competition is foreign exchange, manipulation of currency, manipulation. But quite a few countries actually followed that path.  Some countries already had that practice in the past, such as China and other asian countries had already have that practice in place. I mean, currency evaluation, currency depreciation. But now, other countries have come on board as part of this trade competition. I'm talking about the United States with its QE or quantitative easing. So I meant the currency world, which actually has always been there, but somewhat blatantly, not so expressly. I think this currency war has become more exclusive as of 2008 when markets actually shrank and therefore countries had to be more aggressive in their initiatives with a view to improve their trade balance.

(SOT) Maria Bartiromo, CNBC:
What is the most important thing can you do here in Brazil to ensure that the Real does not create an anti-competitive business environment?

(SOT) Guido Mantega, Finance Minister, Brazil:
Well in regards to commodity prices, there's very little we can do in Brazil. Now, the good news is that commodities have seen such a significant price hike in the past 12 months, actually about 40% has been the price increase from the previous year. I believe that from now onwards we may even see drop in the price of certain commodities which will in turn provide some relief to the world's economy.  Now, the major question mark, of course, remains the oil price. What we can do in Brazil in that regard is, number one, encourage the supply of commodities because we are a major producer of commodities, and, also, produce agricultural commodities. So I am optimistic on the inflation trend. I believe that even on a world wide scale, I think inflation is reaching a turning point, a limit, and is likely to go down.  

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Let's hope he's right. Well that wraps up the latest "Asia Market Daily". I'm Christine Tan from CNBC, thanks for watching.

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