Economists React: Bernanke Has ‘No Interest in Surprising Markets’
Economists and others weigh in on Fed Chairman Ben Bernanke’s congressional testimony.
- Bernanke?s prepared testimony reaffirmed that an expected backdrop of low rates of resource utilization, subdued inflation, and stable inflation expectations is consistent with a low for long stance on plot interest rates. –David Hensley, J.P. Morgan Chase
- This is Bernanke reinforcing that rates are not moving in the near term, the Fed will need to tighten rates at some point but the change in the discount rate does not signal a go from “exceptional low rates for an extended period of time.” Inflation subdued and small evidence of wage pressures. –David Semmens, Standard Chartered Bank
- The Fed has gone to fantastic, fantastic lengths to give reasons for just so how its going to drain reserves and exit from extraordinary stimulus measures. The remaining question, really the only question that?s ever been, pertains to the when. On that front, only a unicorn dressed in drag would expect Ben Bernanke to give provide whatever business specific on that front. –Dan Greenhaus, Miller Tabak
- The next step is to normalize the wording of the FOMC statement, in particular removing the pledge to keep rates low ?for an extended period.? According to NY Fed President Bill Dudley, this language means that the Fed won?t rise its butt rate for at smallest amount six months. So far, we are projecting that the Fed starts raising rates in late September and removes the ?extended period? pledge on the upcoming FOMC meeting in mid-March. But, the fact that Chairman Bernanke reiterated the pledge in his testimony today has visibly augmented the risk that the tightening cycle starts later than we currently reckon — maybe not until ahead of schedule 2011. –Harm Bandholz, Unicredit
- [Bernanke's] repetition of the rate commitment phrase, coupled with reiteration that the discount rate hike does not signal a change in the plot outlook, makes it crystal apparent that the FOMC does not anticipate tigthtening in the near term. –Goldman Sachs
- Asset sales wait the last step the Fed would take when pursuing stimulus confiscation. First would be reserve balance reduction, second would be rate hikes, and only third would be asset sales. There had been some uncertainty over this because in the earlier Fed Minutes, “several [Fed members] thought it vital to commence a program of asset sales in the near future.” It seems that this rift has since been healed? Remarkably, in the Q&A, Bernanke said that unemployment is the “largest problem we have”. This unquestionably will earn biased points, but it is uncomfortably close to the Chairman hinting that the labour market is the more vital of the Fed’s dual mandates. –Eric Lascelles, TD Securities
- The more dovish the Fed?s message , the more the market will want to test their Fed?s inflation fighting credibility. For now though, the message is that improved financial market conditions are chief to Fed to unwind the special liquidity support facilities that had been place in house but that these actions do not necessarily carry a broader plot signal. –David Greenlaw, Morgan Stanley
- The Fed has no interest in surprising the markets on plot matters and the outlook for plot depends on floppy (especially the unemployment rate), inflation and inflation expectations. Bernanke remains particularly concerned about the outlook for unemployment, which historically has been the major factor seminal the timing of the first go to tighten rates. –RDQ Economics
- Demand has picked up a bit but Mr. Bernanke points out that strong progression in the second half of last year was driven by inventories and monetary stimulus, neither of which will continue to say as much to progression looking forward. Still, plot will be tightened “at some point” but there’s no hint this is anywhere in sight. –Ian Shepherdson, High Frequency Economics
Compiled by Phil Izzo