Just back from the BTIG trading desk, and the general sentiment is: Mr. Bernanke will stick to his message and despite attempts to get him off that by reporters, he will avoid deviating.
Why? Because the Fed will be issuing the FOMC statement at 12:30pm ET, and he will avoid deviating from that message. (See Market Insider blog: Markets Expect Fed to Deliver More Good News for Stocks)
That means: he will likely repeat that the "economic recovery is on a firmer footing."
Traders also expect him to repeat that "while commodities are putting upward pressure on inflation," the effects are "transitory."
Here's the five most common questions traders would ask Mr. Bernanke, based on an informal survey of trading desks this morning:
1) you often say employment is the most important metric for you — have your policies improved employment or hurt it? Why has job growth been so anemic?
2) what will the Fed do after QE2 round of quantitative easing ends? Will it continue a "QE2 light" policy by keeping its balance sheet constant by rolling over existing Treasuries?
3) why has the dollar droppedand gold ralliedso much since the Fed began its QE programs? Are you happy to see the dollar this weak? What does it say about confidence in the U.S.?
4) Why is food and energyonly 20 percent of the Consumer Price Index (CPI)? It's a much larger component in Europe and China. Isn't that a factor in why they have been tightening and we have not?
5) Does the Fed invest in the domestic or international equity markets? Can you outline what if anything the Working Group on Markets (Plunge Protection Team) does and how often it meets?
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