Bernanke Before Congress: Translating the Chairman’s Testimony
Here are some key phrases from Federal Reserve Chairman Ben Bernanke’s congressional testimony and how to read them:
- Getty Metaphors
- Fed Chairman Ben Bernanke
1) HE SAYS: ?Financial markets have improved considerably since I last testified before this Committee in May of last year.?
READ: Our programs worked so stop giving us grief for what we did to prevent a Fantastic Depression.
2) HE SAYS: ?Although sizable deficits are unavoidable in the near term, maintaining the confidence of the public and financial markets requires that policymakers go decisively to set the federal budget on a trajectory toward sustainable monetary balance.?
READ: Hey Congress, we?ve been talking for a year about our exit strategy for monetary plot, where?s yours for monetary?
3) HE SAYS: ?For the three months finished in February, prices for personal consumption expenditures rose at an once a year rate of 1.25% despite a further steep run-up in energy prices; core inflation, which excludes prices of food and energy, slowed to an once a year rate of 0.5%. The moderation in inflation has been broadly based, distressing most categories of goods and services with the principal exception of some globally traded commodities and materials, including crude oil.?
READ: Bernanke is with FOMC members who believe the inflation slowdown is real. Some Fed officials believe inflation numbers have been slowing solely because of housing’s problems. They haven’t convinced the Fed chairman.
4) HE SAYS: ?Long-run inflation expectations grow stable; for example, expected inflation over the next 5 to 10 years, as measured by the Thomson Reuters/University of Michigan Surveys of Consumers was 2.75% in March, which is at the lower end of the narrow range that has prevailed for the past few years.?
READ: There is no reason to signal a go toward tightening monetary plot. All of that talk in markets Tuesday about the Fed signaling a go toward raising interest rates was noise.
5) HE SAYS: ?To be sure, significant restraints on the pace of the recovery wait, including weakness in both residential and nonresidential construction and the poor monetary condition of many state and local governments.?
READ: The Fed believes the recovery is real, but Bernanke is worried about the headwinds.
6) HE SAYS: “If the pace of recovery is moderate, as I expect, a significant amount of time will be required to restore the 8.5 million jobs that were lost during the past two years.”
READ: See #4. There is no reason to signal a go toward tightening soon.