Bernanke: 2008 crisis taught Fed lessons

WASHINGTON -- Federal Reserve Chairman Ben Bernanke says a key lesson learned from the 2008 financial crisis is that central banks must have a dual goal of controlling inflation while supporting the banking system.

During a speech Tuesday in Boston, Bernanke said the steps the Fed took during the crisis proved to be successful. The Fed lowered short-term interest rates to record lows and expanded its portfolio of Treasury and mortgage-backed securities to push long-term rates lower.

Bernanke also said the Fed helped calm markets by being more explicit about its interest rate policy -- a trend the Fed will seek to expand in the future.

The Fed has been criticized by those who say keeping rates too low for too long could eventually fuel higher inflation.

In September, the Fed voted to shift $400 billion of its investments to try to lower long-term interest rates. That decision followed the Fed's announcement in August that it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remains weak.

Both steps were approved on 7-3 votes, the highest level of dissent at the Fed in nearly 20 years.

Bernanke used an entrance to the building that was not near an Occupy Boston protest group that has been camped in Dewey Square, across the street from the Boston Fed.

Earlier this month, Bernanke told members of Congress that the economy "is close to faltering." He assured lawmakers the central bank was prepared to take further steps to try to bolster economic growth.

Fed policymakers will meet next on Nov. 1-2. Many economists expect the central bank to hold off on further action, allowing more time for the previously adopted steps to have an impact.