11 Jul 2013
Flash: Deciphering Bernanke’s message – Deutsche Bank
FXstreet.com (New York) - The overall message from Bernanke was one of reassurance that highly accommodative monetary policy will continue for the foreseeable future, notes Macro Strategy Analysts J. Reid and C. Tan.
In terms of the Fed's dual mandate, Bernanke repeated the message that the Fed was not on target on its employment objectives, and low inflation signaled that more stimulus was needed. There was additional emphasis on low inflation when he said that the Fed remained committed to defending both an undershoot and overshoot in inflation.
On the topic of fiscal policy, he added that it was too early to say whether the US had weathered the fiscal restraint in Washington - this perhaps ruling out the start of tapering in the summer. When asked if he would have done anything differently following the June 18th/19th FOMC, Bernanke indicated that he wouldn't. He said the market volatility of the past six weeks could have been much worse if he had kept silent on their plans for tapering, misleading investors into thinking the asset purchases could go on forever.
Another interesting part of the Q&A came when he discussed financial conditions. Here the Chairman said that financial conditions had tightened and it's something that the Fed was watching. He added that "if financial conditions were to tighten to the extent that they jeopardize the achievement of inflation and employment objectives, then we would have to push back against that".
In terms of the Fed's dual mandate, Bernanke repeated the message that the Fed was not on target on its employment objectives, and low inflation signaled that more stimulus was needed. There was additional emphasis on low inflation when he said that the Fed remained committed to defending both an undershoot and overshoot in inflation.
On the topic of fiscal policy, he added that it was too early to say whether the US had weathered the fiscal restraint in Washington - this perhaps ruling out the start of tapering in the summer. When asked if he would have done anything differently following the June 18th/19th FOMC, Bernanke indicated that he wouldn't. He said the market volatility of the past six weeks could have been much worse if he had kept silent on their plans for tapering, misleading investors into thinking the asset purchases could go on forever.
Another interesting part of the Q&A came when he discussed financial conditions. Here the Chairman said that financial conditions had tightened and it's something that the Fed was watching. He added that "if financial conditions were to tighten to the extent that they jeopardize the achievement of inflation and employment objectives, then we would have to push back against that".