Federal Reserve Chairman Ben Bernanke hit back on Friday at critics of the U.S. central bank’s bond-buying program and issued a thinly veiled attack on China’s policy of keeping its currency on a leash.

Bernanke, facing a chorus of protests about the asset-buying spree from within and outside the central bank, said a more vigorous U.S. economy was essential to fuel the global recovery and dismissed charges he was debasing the dollar.

“The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States,” Bernanke said in a speech to a conference at the European Central Bank in Frankfurt.

The Fed’s Nov. 3 decision to buy a further $600 billion in U.S. government debt with new money generated outrage among policymakers in many nations, who accused the United States of seeking to weaken the dollar to gain an export edge.

German Finance Minister Wolfgang Schaeuble called the policy “clueless” while domestic critics have argued the policy could ignite inflation and fuel asset bubbles.

Fed officials circled their wagons this week to defend the program. Two added their endorsement on Thursday, but another expressed opposition and a fourth said monetary policy should not play the main role in driving a stronger recovery.

STRUCTURAL ADJUSTMENTS

“Deficits and surpluses are generated by many countries’ behaviour not a single currency,” Bernanke said in a later panel discussion with IMF Managing Director Dominique Strauss-Kahn and European Central Bank President Jean-Claude Trichet.

“It will be very difficult for exchange rates by themselves to restore the balance and so I think structural adjustments on both sides are necessary,” Bernanke said.

Strauss-Kahn said he too recognised the difficulties involved but said global imbalances could not be tackled without “important changes in the relative values in the currencies”.

“We need to move in that direction,” he said.

Addressing international criticism of the Fed’s action, Bernanke said much of the recent weakness of the dollar reflected an unwinding of the increases that were notched as investors fled to the safety of the greenback during the European sovereign debt crisis in the spring.

Many emerging economies have worried that volatile investment inflows sparked by the dollar’s decline could be destabilizing — either fuelling inflation or asset bubbles.

Bernanke said the failure of some emerging market economies with trade surpluses to allow their currencies to appreciate was making the problems those countries face worse.

“Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals,” he said, without explicitly pointing to China.

U.S. officials have long argued that an undervalued Chinese yuan gives the Asian export powerhouse an unfair advantage.

Bernanke said inflexible currencies were preventing a needed rebalancing of global growth and could end up destabilising the world economy.

“For large, systemically important countries with persistent current account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account,” he said.

SOCIAL COST

Bernanke said sluggish U.S. growth, falling inflation and an unemployment rate that has hovered near 10 percent for months convinced Fed policymakers they needed to pump in more stimulus.

“On its current economic trajectory, the United States runs the risk of seeing millions of workers unemployed or underemployed for many years,” he said in his speech. “As a society, we should find that unacceptable.”

Bernanke said a fiscal program that combined near-term measures to enhance growth and steps to address long-range deficits would be an important complement to Fed policies.

The Fed’s bond-buying plan — know as quantitative easing or QE, for short — won a surprise endorsement on Thursday from a policymaker who had been seen as an internal critic.

“I believe that QE is a move in the right direction,” Minneapolis Federal Reserve Bank President Narayana Kocherlakota told a conference in Chicago.

Cleveland Fed chief Sandra Pianalto also defended the plan as a way to help lift “uncomfortably low” inflation and fend off the risk of a debilitating broad drop in prices.

However, Philadelphia Fed President Charles Plosser said the costs of the program did not outweigh the benefits, while Fed Governor Kevin Warsh said the economy faced problems that monetary policy could not solve.

“Monetary policy has an important role to play,” Warsh told business leaders in Chicago. “But it is not a predominant role.”

Instead, he said, businesses need more certainty in terms of fiscal, trade and regulatory policies.