Bernanke will try to herd wild markets at meeting At one of the recent Federal Reserve retreats in Jackson Hole, the central bankers and their guests were treated to an exhibition by a leading horse whisperer. Maybe Fed Chairman Ben Bernanke was taking notes. Fed watchers said that Bernanke’s principal goal at the press conference on Wednesday at the end of the central bank’s two-day meeting will be to calm jittery financial markets, spooked by fears that the Fed is anxious to start to reverse course and end its easy policy stance. Since the beginning of the year, the Fed has been buying $85 billion in monthly bond purchases in an open-ended program to keep long-term interest rates low and spur risk-taking. While it was common belief that the central bank might slow the pace of purchases by the end of the year, the markets were caught off guard when Fed officials began to voice support last month for reducing purchases, analysts said. With growth at a slower rate, and inflation lower, than at the Fed’s last policy meeting in early May, many investors were puzzled by the seeming willingness of Fed officials to taper. Bernanke himself told Congress in late May that the Fed could begin tapering in the “next few meetings.” “It does feel like people were not anticipating them bringing tapering up and it is not clear why they did. It makes people nervous when they don’t understand the logic,” said Lewis Alexander, chief economist at Nomura Securities International in New York. “Investors think the Fed is in a hurry,” agreed Julia Coronado, chief economist with BNP Paribas. The Fed has pledged to keep buying assets until the labor market showed signs of substantial improvement. But economists say this leaves too much of a gray area. Analysts were recently divided over whether the May unemployment report, which showed a 175,000 gain in payrolls and a tick up in the unemployment rate to 7.6%, was good enough for the Fed to start reducing the pace of purchases. “The Fed has been completely mysterious on the thresholds for tapering,” said Ethan Harris, co-head of global economic research at Bank of America Merrill Lynch. “I think they have to start talking about what is the threshold. I don’t see how they can continue to pretend they don’t have one,” Harris said. Analysts are not calling for a tapering after this week’s meeting.
Posted on: Mon, 17 Jun 2013 12:20:40 +0000
Trending Topics
Recently Viewed Topics
© 2015