Sound The Trumpet : Bernanke’s Qe Dance: Fed Could Taper in Next Two Meetings, Tightening Would Collapse the Market

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“Bernanke’s Qe Dance: Fed Could Taper in Next Two Meetings, Tightening Would Collapse the Market”
by Forbes
May 23rd, 2013

Markets went on a wild rollercoaster ride as Fed Chairman Ben Bernanke addres

sed Congress’ Joint Economic Committee, first making it clear that tapering QE today would be unproductive, then admitting that it could happen over the next two FOMC meetings if warranted by the data. Channeling his inner Greenspan, Bernanke filled the ether with words meant to mask his underlying intentions, but a few contradictions did make their way into his speech which reveal his easing bias. QE, it seems, is still here to stay.

If the data supports it, “[the Fed] could take a step down in the next two meetings,” Bernanke told Congressman Kevin Brady, who asked if the Fed’s asset purchases could end before Labor Day. Within seconds, bond and equity markets, which had rallied strongly, took a sharp turn to the downside. Minutes later, Wall Street was back in rally mode.

Bernanke was hedging his words, but ultimately signaled that the Fed won’t begin to tighten any time soon, and that means quantitative easing is still the name of the game. The QE riddle came in two parts: first, in his prepared remarks, Bernanke noted a “premature tightening [would] carry a substantial risk of slowing or ending the economic recovery.”

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