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May 23, 2013
May 23, 2013

Fed enters delicate new phase of communication

NEW YORK (Reuters) – Investors’ hair-trigger reaction to Federal Reserve Chairman Ben Bernanke’s testimony on Wednesday marks a delicate new policy phase for the U.S. central bank in which communication is paramount.

Pitfalls lurk as the Fed approaches the time when it will begin to withdraw its extraordinarily accommodative policies, probably starting some time this year with a tapering of its $85 billion in monthly bond purchases.

May 22, 2013
May 22, 2013
May 22, 2013
May 22, 2013
May 22, 2013
May 22, 2013
via MacroScope

What *really* keeps the Fed up at night

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The Federal Reserve has a long list of worries about the unexpected consequences of its quantitative easing (QE) program. There’s the risk that all the bond-buying is quietly stoking bubbles in disparate asset classes, and the lingering risk of a future run-up in inflation, and even the political risk of balance sheet losses down the road. But above all, what really keeps Fed policymakers up at night might be their most immediate concern: that investors will overreact when they finally decide to reduce the $85-billion monthly pace of asset purchases.

In perhaps the starkest words yet from someone in Fed Chairman Ben Bernanke’s inner circle, here’s what New York Fed President William Dudley said about this in a speech to the Japan Society in New York on Tuesday:

May 22, 2013
May 22, 2013

Bernanke expected to stay the course on Fed policy

NEW YORK (Reuters) – Federal Reserve Chairman Ben Bernanke is not expected to hint at a pending policy change when he testifies before the U.S. Congress on Wednesday despite some speculation among investors that the central bank could soon reduce its massive bond buying program.

Bernanke’s close ally, New York Fed President William Dudley, stressed repeatedly on Tuesday that uncertain economic conditions meant it was too early to determine whether to taper the Fed’s $85 billion in monthly purchases.