Bernanke Concerned About Economy (Update) genre: Polispeak

Update:

After years of listening to Alan Greenspan carefully signal his thoughts on the intentions of the Federal Reserve, economists and financial expersts are attempting to understand the implications of the remarks made by new Federal Reserve Chairman Ben Bernanke. Bernanke has appeared to be more willing to discuss his thoughts publically and investors have expressed some concerns about the lack of restraint. Bloomberg has the full article here.

June 6 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, seeking to buttress his inflation-fighting credentials, may have put to rest any notion of an interest-rate pause until price increases slow.

After missteps in recent weeks that led some investors to doubt his skills, Bernanke told banking executives in Washington yesterday that rising inflation indexes are ``unwelcome'' and the Fed will make sure they are ``not sustained.''

Bernanke's remarks contained no reference to the suspension of rate increases that he flagged in April -- comments that led some investors to question his commitment to keeping a lid on prices. His emphasis on inflation surprised traders, who pushed bond yields higher and increased bets on the likelihood of further tightening when policy makers meet on June 28-29.

Traders yesterday placed a 84 percent probability of a quarter-point increase in the Fed's rate to 5.25 percent on June 29, up from 48 percent before Bernanke's comments, based on the price of futures tied to the fed funds rate on the Chicago Board of Trade.

Bernanke described near-term readings of inflation, the three- and six-month annual rates of change in two indexes of consumer prices minus food and energy, as being ``unwelcome.''

Bernanke's references yesterday to defeating inflation overshadowed those on a slowing economy. ``The Fed is facing an issue of credibility,'' said Lyle Gramley, a former Fed governor who's now a senior economic adviser to the Stanford Washington research Group. ``Inflation expectations have started to turn up. Bernanke wants to make sure past gains in credibility are not wasted.''

Bernanke is in the difficult position of succeeding the popular Federal Reserve Chairman, Alan Greenspan, who is often credited with keeping a tight reign on U.S. monetary policy in order to insure economic stability. It may take some time for Bernanke to garner such confidence.

___________________________________________________________
Original Posting:

Federal Reserve Chairman Ben Bernanke voiced concerns about inflation and the economy as there continues to be evidence the economy is slowing. Read the full article here. In light of Karl Roves recent remarks that Republicans need to put a greater emphasis on the economy, the news cannot be encouraging.

WASHINGTON - Even though the once-barreling U.S. economy is slowing, Federal Reserve Chairman Ben Bernanke Monday called recent increases in inflation unwelcome and pledged to make sure surging energy prices don’t make things worse.

In deciding the Federal Reserve’s next rate move in late June, Bernanke said the inflation outlook “will receive particular scrutiny." Fed policy-makers “will be vigilant" to ensure the recent pattern of higher readings in underlying inflation “is not sustained," he said a speech to an international monetary conference.

On Wall Street, the Dow Jones industrials slid 160 points as Bernanke’s fresh warnings on inflation rattled investors. The market had been sharply lower even before Bernanke's remarks, but prices slid further when the text of the speech was released.

The remarks seemed to raise doubts that the Fed would refrain from the recent pattern of steadily increasing interest rates. The remarks coupled with inflation concerns led the stock market to drop nearly 200 points today.

“With the economy now evidently in a period of transition, monetary policy must be conducted with great care and with close attention to the evolution of the economic outlook," Bernanke said. He stressed anew that future rate decisions will rely heavily on what economic barometers say about inflation and business activity.

As measured by the Consumer Price Index, “core" inflation — which excludes food and energy prices — rose at an annual rate of 3.2 percent over the last three months and 2.8 percent over the past six months. “These are unwelcome developments," Bernanke said.

Private economists believe economic growth in the April-to-June quarter will probably clock in around a 2.5 percent pace or slightly better.

He also pointed out that the slower job creation seen in recent months and an edging up in filings for unemployment benefits also are “consistent with the softening in the pace of overall economic activity that seems to be under way."

If the second quarter numbers do come in at or below a three percent growth rate and the thrid quarter numbers, which will be released shortly before the November elections, remain similar, Republicans may find themselves without the ability to use the economy to change the negative mood seen to be prevalent amongst voters.

Daniel DiRito | June 6, 2006 | 9:54 AM
AddThis Social Bookmark Button

Post a comment


Trackback Pings

TrackBack URL for this entry


© Copyright 2024

Casting

Read about the Director and Cast

Send us an email

Select a theme:

Critic's Corner

 Subscribe in a reader

Encores

http://DeeperLeft.com

Powered by:
Movable Type 4.2-en

© Copyright 2024

site by Eagle River Partners & Carlson Design