Federal Reserve Chairman Ben Bernanke is firing back amid criticism of the Fed's easy-money policies at home and abroad

By keeping their currencies artificially weak, Mr. Bernanke argues, China and other emerging markets are allowing their economies to overheat, preventing trade imbalances from adjusting and producing what he called 'a two-speed . . . recovery' that isn't sustainable. Their 'strategy of currency undervaluation' has 'important drawbacks' for them and the world economy, he warns.

Mr. Bernanke has come under attack for the Fed's decision to purchase $600 billion in U.S. Treasury bonds in an effort to drive down long-term interest rates. Critics in the U.S say it could cause inflation. Critics abroad say the flood of dollars that the Fed is effectively printing to finance the purchases is causing investors to pour money into overseas economies and could cause asset bubbles.

Some have accused the Fed of trying to weaken the dollar to spur U.S. exports.

Fed officials have denied that is their goal, though Mr. Bernanke effectively acknowledged the U.S. currency should weaken against currencies in emerging markets because their economies are growing so much faster than economies in the developed world.

The Fed chairman's message, though scholarly in tone, was unusually blunt in laying blame for inflationary pressures in emerging markets and for tensions over currencies on countries like China that hold their currencies down.

'Why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals?' he asks. Mainly because they believe that will spur exports and boost growth, he says.

Central banks in many countries intervene in currency markets to manage exchange rates. As dollars flood into their economies from exports, the central banks hold on to the dollars and use them to purchase assets like U.S. Treasury bonds, rather than converting them back into their domestic currencies, which would make those currencies rise in value.

Mr. Bernanke notes that in preventing the yuan from appreciating in exchange for dollars, China has accumulated a massive $2.6 trillion stock of U.S.-dollar assets.

Mr. Bernanke also makes his case against domestic critics, arguing that unemployment could keep rising without action by the Fed and that inflation was too low and could fall further.

Though critics say inflation could soar because of the Fed's actions, Mr. Bernanke says he is committed to keeping inflation at around 2%. It is now around 1%, by the Fed's preferred measures, which strip out food and energy prices.