Market on Edge as Bernanke Prepares to Take the Stage
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Anticipation is heating up ahead of Fed Chairman Ben Bernanke's critical speech in Jackson Hole tomorrow, and the airwaves and blogosphere are jammed with speculation about what Mr. Bernanke will or will not say.
While the market overall seems to be somewhat split over the details, most investors don't expect imminent policy moves to be announced during the speech tomorrow. But that doesn't mean it won't move markets or be interesting. After all, Ben has to find a way to wiggle his way off the hook without ruining the stock market rally, and this could be amusing in and of itself.
It doesn't make sense for Bernanke to use Jackson Hole to indicate fresh policy initiatives. If he did, he would take the wind out of his own sails by front-running the Sept. FOMC meeting. On the other hand, the FOMC minutes from August 1st suggested the Fed was moving forward with QE3, and at the very least Bernanke has to clarify what he meant. This might include friendly remarks about QE3 and a lot of vague comments. He might also hint at QE3 as a ploy to buy more time, especially if he really is undecided.
The most interesting thing that could happen would be if Bernanke really did try to gather support for another cutesy maneuver, like Operation Twist. Considering the audience, the reaction by other central bankers and academics could be the most interesting story of the day, especially if Bernanke decides to drop a few jaws. This is unlikely, but not beyond the realm of possibility considering recent events.
Mr. Bernanke's speech entitled "Monetary Policy Since the Crisis" is scheduled for 10AM ET.
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While the market overall seems to be somewhat split over the details, most investors don't expect imminent policy moves to be announced during the speech tomorrow. But that doesn't mean it won't move markets or be interesting. After all, Ben has to find a way to wiggle his way off the hook without ruining the stock market rally, and this could be amusing in and of itself.
It doesn't make sense for Bernanke to use Jackson Hole to indicate fresh policy initiatives. If he did, he would take the wind out of his own sails by front-running the Sept. FOMC meeting. On the other hand, the FOMC minutes from August 1st suggested the Fed was moving forward with QE3, and at the very least Bernanke has to clarify what he meant. This might include friendly remarks about QE3 and a lot of vague comments. He might also hint at QE3 as a ploy to buy more time, especially if he really is undecided.
The most interesting thing that could happen would be if Bernanke really did try to gather support for another cutesy maneuver, like Operation Twist. Considering the audience, the reaction by other central bankers and academics could be the most interesting story of the day, especially if Bernanke decides to drop a few jaws. This is unlikely, but not beyond the realm of possibility considering recent events.
Mr. Bernanke's speech entitled "Monetary Policy Since the Crisis" is scheduled for 10AM ET.
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FOMC Minutes, Ben S. Bernanke, Federal Open Market CommitteeComments
Bernanke
Bernanke is between a rock and a hard place. He wants to unload more QE. However, if he does he signals that things are really bad, bad, bad. If he doesn't assets prices could fall. Keeping dangling that carrot Mr. Bernanke.
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Sell-Off
TraderX on Aug 31, 2012 07:32 AMMark as Spam | Reply to this comment
Brace for a disappointment and sell-off