Those were the words Ben Bernanke used to describe the macro outlook. He refrained from discussing double-dip risks, but in contrast to the market’s desire for more policy juice, he actually spent more time talking about the how, “at some point, the Committee will need to begin to remove monetary policy accommodation to prevent the buildup of inflationary pressures”.
Amazing – the Fed is still pre-occupied with inflation at this juncture – David Rosenberg To register for David’s Market Musings and Data Deciphering go HERE
Bernanke Says Economic Outlook is “Unusually Uncertain”, Fed Prepared for “Actions as Needed”
Be prepared for Quantitative Easing Round 2 (QE2) and/or other misguided Fed policy decisions because Bernanke Says Fed Ready to Take Action.
Treasuries rose, pushing two-year yields to the fourth record low in five days, as Federal Reserve Chairman Ben S. Bernanke said the economic outlook is “unusually uncertain” and policy makers are prepared “to take further policy actions as needed.”
Ten-year note yields touched a three-week low as Bernanke said central bankers are ready to act to aid growth even as they prepare to eventually raise interest rates from almost zero and shrink a record balance sheet.
“An unusual outlook may call for unusual measures, and that means the Fed may take more action as needed, which would lead to lower rates,” said Suvrat Prakash, an interest-rate strategist in New York at BNP Paribas, one of the 18 primary dealers that trade with the central bank.
The Fed chief didn’t elaborate on steps the Fed might take as he affirmed the Fed’s policy of keeping rates low for an “extended period.” Economic data over the past month that were weaker than analysts projected have prompted investor speculation the Fed may increase monetary stimulus in a bid to keep the economy growing and reduce a jobless rate from close to a 26-year high.
“Bernanke acknowledged that things weren’t very strong economically and left action on the table without going into details, and that’s sending investors from stocks into bonds,” said James Combias, New York-based head of Treasury trading at primary dealer Mizuho Financial Group Inc.
Bernanke Has Met His Match
Hyperinflationists will be coming out of the woodwork on the Fed’s statements today. However, I calmly note that Bernanke has met his match: consumer attitudes.
We have reached a Consumption Inflection Point – No One Wants Credit and consumer spending plans have plunged. There is nothing Bernanke can do to “fix” that.
Besides, there is nothing to “fix” anyway. Boomers headed towards retirement better be saving more and spending less. The same applies to kids out of college without a job.
Finally, I note that Bernanke thinks consumer spending is on the rise. It’s not. Bernanke needs to get out in the real world and see what’s happening. He can start by reading Rockefeller Institute Confirms Rising Retail Sales a Mirage.
Mike “Mish” Shedlock
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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.