On Wednesday in Washington, Federal Reserve Chairman Ben Bernanke presented congressional testimony that repeated, virtually word for word, statements about U.S. monetary policy he has been making since last September.
The Federal Reserve, Bernanke said, would continue buying $85 billion of bonds monthly until it was confident of reducing unemployment to 6.5 percent. The scale of these purchases might be increased or diminished – but only if and when such shifts were warranted by economic statistics. Now, he said, there is no case for a change in either direction.
The reaction to this tediously familiar statement, which was followed by publication of the equally repetitive minutes of the last Fed policy meeting, was some of the wildest gyrations seen in the world’s financial markets for months.
As Bernanke spoke, Wall Street soared to its highest level ever, since the Fed chairman had clearly contradicted speculation about an early tightening of monetary policy. An hour later, however, prices slumped far below their opening levels, as the speculation of tightening revived among investors who claimed to read new meaning into Bernanke’s familiar phrases.