In a speech at the Bank of Japan on Wednesday, said the Fed's key before an international audience by the central bank is independent of politics was better to handle the economy. He also detailed the steps the Fed has taken to become more transparent and accountable to the public two conditions, said he needed to return for greater autonomy.
Fed leads a fight against a proposal approved by Parliament in December that would give the Fed decisions oversees the National Accountability Office, an investigative part of Congress.
Mr. Bernanke has strongly opposed the measure, which is part of the government's broader effort to revise the Financial Regulation.
A central issue for political influence can be pressed to keep interest rates low to strengthen the economy and employment, "said Mr Bernanke. Although it could be popular in first-and helpful in a campaign, it will lead to higher inflation in the future, hurt the economy's long term prospects.
"So political interference in monetary policy may generate unwanted boom-bust cycle, which ultimately leads to both less stable economy and higher inflation," said Fed chief said.
The regulatory overhaul bill passed by the Senate last week with a diluted version of the House bill audit, which the Fed broad support. But it contains a provision opposed by the Fed that would give the president power to appoint and the Senate to confirm the leader of the New York Fed, a move that will make it easier to put pressure on the central bank by giving politicians more influence in his leadership.
House and Senate bills must now be reconciled by Congress.
History shows that central banks in the U.S., UK, Europe and Japan where they have been protected from political pressure, has a better track record in managing the economy, said Mr. Bernanke.
Because the interest rate changes take time to have an effect on the economy, a long-term perspective is needed in the Fed aims to achieve full employment and stable prices, he said. It would not be possible if short-term political interests must be met.
Mr. Bernanke was trying to lay out the steps the Fed has taken to become more transparent and accountable, including publishing minutes of its policy setting meetings and provide regular updates of loans and securities it holds. Fed gives weekly updates on its portfolio, while listed companies to report quarterly.
Fed is now providing weekly updates about one U.S. dollar loan program with other central banks that was revived this month to address the financial market strains as a result of Europe's debt crisis.
Some U.S. lawmakers say that the plant is afraid of foreigners, but the Fed actually earned money when it was used during the economic crisis in 2008 and 2009.
In a brief question and answer session following the speech, Mr. Bernanke asked about loan program, and if he thought it should be made permanent. "We would not necessarily be to provide a permanent service to the financial markets," he replied. "It is a good case that we should exert pressure, or at least try to influence the banks better manage these currency differences," he says, and notes that some banks have become dependent on U.S. dollar assets, but has had problems with to educate them during the crisis.
He took two questions, one about whether the Fed should try to make themselves more flexibility to raise the inflation target of around 2% to 4%, a second on the Fed's role in saving large financial institutions during the financial crisis.
He reiterated previous statements that he was at a higher inflation target. With respect to the rescue, he said: "We hope never again to be involved in such activities."
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