Bernanke’s jobs pivot

March 26, 2012

Jason Lange contributed to this post

Fed Chairman Ben Bernanke made no direct references to the outlook for monetary policy in a speech to the National Association for Business Economics on Monday. But the message from his heavy focus on a weak labor market was pretty clear: The Fed is not considering tightening policy in the near future and stands ready to do more if growth doesn’t pick up steam this year. Ironically, Bernanke’s pessimism cheered the markets – by signaling that another round of stimulus is not off the table.

Andrew Wilkinson at Miller Tabak captured Bernanke’s feat for the day:

It ain’t what you say it’s the way that you say it – at least that’s what Chairman Bernanke found out on Monday by not mentioning further quantitative easing.

After its last two meetings, the Fed said it would likely keep rates near zero at least through late 2014. But upbeat economic signs, including solid employment growth, have led investors to bet on a move as early as the middle of next year. Bernanke’s speech appeared aimed at pushing back against those expectations.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi, reacted to the speech on the sidelines of the NABE conference.

Reading between the lines, it sounds like he’s pushing the ball forward towards having a discussion about doing more.

Bernanke indicated that the Fed’s more likely next move is a further easing of policy, not a tightening, said Diane Swonk at Mesirow Financial, also at NABE.

(He) justifies their current position, builds a case for potentially extending the twist and leaves the powder dry on QE3. […]

(His comments) are very telling about where his bias is. It’s still on the easing side. It’s still on the late 2014 side.

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