Bernanke Heads to the Hill: 'Only One Bullet Left'
Those expecting new revelations as to where Federal Reservepolicy is heading when chairman Ben Bernanke delivers his semiannual monetary policy report to Congress Tuesday may come away disappointed.
With the U.S. economy languishing and job creation anemic, Fed watchers and investors alike will be keen to hear what it will take for the central bank to ease monetary policy further in an effort to spur economic growth.
“Investors will be looking for signs that (Bernanke) is considering more QE,” Lawrence Creatura, portfolio manager at Federated Investors said.
QE refers to quantitative easing where the Fed buys bonds outright in order to inject more money into the economy and bolster growth.
“I think he has been doing an excellent job of speaking softly and carrying a big stick and that strategy has worked well for him,” Creatura said. “The fact that he has the ability to do (QE3) will keep investors hopeful. The Fed only has one bullet left in the gun and incremental rounds of QE are less effective…so being able to have the same effect verbally is valuable.”
But others don’t expect Bernanke to reveal too much tomorrow or when he testifies again on Wednesday.
John Brynjolfsson, Armored Wolf CIO, told CNBC’s “Fast Money Halftime Report” that the “market seems to be pricing in an announcement by Bernanke tomorrow and I simply don’t expect that to happen.”
Nonetheless, Brynjolfsson expects another round of quantitative easing later in the year before the election. (Related: Stocks Might Be 50% Lower Without Fed).
There is speculation that Bernanke will discuss more Fed asset purchases during his speech at the annual central bank confab in Jackson Hole in late August.
Tomorrow’s June reports on industrial production and consumer prices will give additional clues as to the state of the overall economy.
Earnings announcement will also be coming fast and thick tomorrow. Coca-Cola, Goldman Sachs, Johnson & Johnson and Mattel report before the opening bell. Intel, Yahoo and CSX will report after the close.
A complete earnings calendar can be found here.
“Earnings are somewhat exceeding expectations so far early in the quarter, but that's also based on expectations which are extremely low.” David Fleisher, president of Firstrust Financial Resources, told CNBC’s “Street Signs” on Monday.
(JeeYeon Park contributed to this report).