Stocks are fractionally lower following Ben Bernanke's speech because Mr. Bernanke declined to elaborate on any further stimulus the Federal Reserve might provide, or under what conditions it would do so.
Notably, he did not address any of the three options Jon Hilsenrath discussed in The Wall Street Journal today:
- extending the maturities of the Fed's bond portfolio,
- reducing the Fed's overnight lending rate from 0.25 percent,
- and make their economic objectives and targets for interest rates more explicit.
This reluctance to discuss stimulus options in detail may be due to internal dissent.
Asked about dissent in the FOMC, Mr. Bernanke got one of the only laughs of the afternoon when he replied, "There's a reason why it's a committee...if two people always agree, one of them is redundant."
At any rate, President Obama may be a help, because additional stimulus measures he proposes may allow the Fed to stay on the sidelines for a time.
Mr. Bernanke again urged lawmakers to look for long-term solutions to the debt crisis, but cautioned against cutting too soon: "A substantial fiscal consolidation in the shorter term could add to the headwinds facing economic growth and hiring."
Mr. Bernanke reiterated that inflation is expected to moderate in coming quarters.
While he did not address the question of a recession directly, he did say that "growth in the second half looks likely to pick up" implying the Fed considers a recession unlikely.
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