Several points stand out in Mr. Bernanke's press conference.
1) completely rejected the notion that QE2 and a loose monetary policy has anything to do with inflation, particularly food inflation in emerging markets, instead insisting that such inflation is due to expanding demand.
2) said that the Fed is considering holding regular press conferences to improve transparency.
2) acknowledged, as he has before, that Fed policy affects the stock market by 1) lowering long term yields & forcing investors into alternative assets, and 2) improving the economy, which then helps earnings.
3) again insisted that "overall inflation remains quite low" and cited low core inflation and slow wage growth. Most traders do not believe that using core inflation (ex-food and energy) is a fair way to look at inflation, and they certaintly do not believe that looking at 2010 CPI is a good way to get a whiff of inflation.
They have a good point. In the last 24 hours, I've noted that companies as diverse as DowChemical , Kellogg , AMR , Lubrizol , Wolverine World Wide and Darden were raising prices due to higher commodity costs. This will not immediately show up in the CPI, but it clearly will.
Just look today: LG Electroics said it will increase appliance prices 8 to 10 percent to match the price increases of rivals Whirlpool and Electrolux.
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