Ben Bernanke

Interpreting the Fed: what Bernanke really told us

August 10, 2011 4:00 pm by Gavyn Davies

Opinion is sharply divided about what the Fed intended to signal in the statement issued on Tuesday. Some have seen the statement as very dovish, because it said that the Fed intended to leave short rates at “exceptionally low levels” until mid 2013 – the first time that a specific date of this sort has ever been set by the FOMC.

Others, however, concluded that the statement contained nothing really new, since the markets had already assumed that short rates would be close to zero for the next two years. Furthermore, the fact that there were three dissents from the majority decision has led some to deduce that the further large step to more quantitative easing (QE3) is still a long way off. On this view, nothing really changed. Read more

Tags: Ben Bernanke, FOMC, QE2, QE3, Rudesbusch, Taylor Rule, The Fed
Posted in Macroeconomics, Monetary policy, US | Permalink

Bernanke and the divided Fed

July 13, 2011 5:15 pm by Gavyn Davies

Ben Bernanke. Image by EPA.

The financial markets seem determined to interpret today’s statement by the Fed chairman in a dovish light, but a careful reading of his words does not support that point of view. True, Mr Bernanke outlined the possible ways in which monetary policy might be eased further if recent economic weakness should prove more persistent than expected. But he gave equal weight to the possibility that “the economy could evolve in a way that would warrant less-accommodative policy”.

There was no hint in the text about which of these outcomes he considered the more likely. We already knew from yesterday’s FOMC minutes for the June meeting that the committee is split about the likely evolution of policy, and we were waiting to see today whether the chairman would throw his weight behind either the doves or the hawks. He failed to do either. Read more

Tags: Ben Bernanke, FOMC, QE2, QE3, The Fed
Posted in Macroeconomics, US | Permalink

US economic cavalry is saddle sore

July 11, 2011 5:04 pm by Gavyn Davies

Risk assets like global equities have had a very bad day, but they are still trading fairly close to their highs for the year. This is surprising, given the continuing slowdown in the global economy, and the failure of policy makers in Europe and the US to come to terms with the serious problems facing them.

Particularly worrying is the growing evidence that the US economy is struggling even to hold unemployment constant, while fiscal and monetary policy have both become moribund for the time being. The markets still seem confident that US growth will spontaneously reignite in coming months, without requiring any help from expansionary policy. If they are wrong, there are few signs that US policy would be able to respond quickly or coherently. Read more

Tags: Ben Bernanke, QE, The Fed
Posted in Macroeconomics, US | Permalink

US economy: out of ammo?

June 3, 2011 4:08 pm by Gavyn Davies

The US employment numbers for May seemed to surprise the markets, but in fact they confirmed what we already knew from a string of earlier data releases, which is that the economy has slowed very markedly in recent months. The debate now is whether this slowdown has been triggered mainly by transitory factors – the fallout from the Japanese earthquake, stormy weather, and a spike in gasoline prices above $4/gallon – or whether it reflects a more fundamental malaise in the economic recovery.

The equity markets have remained fairly upbeat about this, and most economists are still strongly of the view that this is just another mid-cycle slowdown of the sort which occurred last year. This still seems to be the most probable outcome (as I will argue here on Sunday). But what if this optimism is wrong? Is there a Plan B? Read more

Tags: Ben Bernanke, QE2, QE3, The Fed
Posted in Monetary policy, US | Permalink

Reflections on Bernanke

April 28, 2011 4:46 pm by Gavyn Davies

Following yesterday’s live blog on FT Alphaville, here are some quick final reflections on the Bernanke press conference: Read more

Tags: Ben Bernanke, The Fed
Posted in Macroeconomics, US | Permalink

What Bernanke will say, and what he should say

April 26, 2011 2:45 pm by Gavyn Davies

In preparation for Chairman Bernanke’s press conference on Wednesday, my friends at FT Alphaville asked me to respond to a series of questions on US monetary policy – first predicting what the Fed Chairman will say, and then commenting on what he should say. During the press conference itself, I will be participating in a live blog session over at Alphaville. Read more

Tags: Ben Bernanke, The Fed
Posted in Macroeconomics, US | Permalink

Why has the American economy slowed down?

April 24, 2011 5:13 pm by Gavyn Davies

The past week has seen new highs for the year in many major equity markets, including the US. However, oil prices have continued to climb in ominous fashion, and there have been some weaker signals from the initial economic activity indicators which have appeared for the month of April. In the US, for example, the important Philadelphia Fed index fell sharply, housing data continued to bump along the bottom, and initial unemployment claims were disappointing. Next Thursday will see the publication of the US GDP figures for 2011 Q1, which are likely to report quarterly annualised growth at only around 1.5 per cent, sharply down from the previous quarter. So why has the US economy slowed, and should we be worried about it? Read more

Tags: Ben Bernanke, The Fed
Posted in Macroeconomics, US | Permalink

Can bonds survive the Fed’s exit?

March 30, 2011 10:15 am by Gavyn Davies

Many investors fear that the Fed’s impending exit from QE2 will have a very damaging effect on the financial markets. Whether they are right will depend on the nature of the exit, and its impact on bond yields. Read more

Tags: Ben Bernanke, James Tobin, QE2, The Fed
Posted in Macroeconomics, US | Permalink

A week to focus on central bank tightening

March 27, 2011 2:25 pm by Gavyn Davies

The financial markets remain torn between their concerns over “black swans” (exogenous shocks from oil prices, food prices, and the Japanese earthquake) and the improving state of the global economy. Read more

Tags: Ben Bernanke, central banks, European Central Bank, QE2, The Fed
Posted in Emerging markets, Macroeconomics, US | Permalink

The ECB says “don’t tread on me!”

March 3, 2011 6:47 pm by Gavyn Davies

Today’s hawkish statement from the ECB means that a rise in interest rates from 1 per cent to 1.25 per cent is almost certain to be announced next month. Only a major discontinuity in Europe’s financial markets can now prevent it. The key question is whether this rate increase is just an isolated event, which proves to be mistaken and is therefore rapidly reversed – like the infamous quarter point rise announced by the ECB in July 2008, when the world economy was already in recession. Or does the ECB announcement definitively mark the low point for global policy rates? If so, it will prove to be the first step of the central banks’ “exit” process, and the start of a lengthy period of monetary policy normalisation. Read more

Tags: Ben Bernanke, ECB, Jean-Claude Trichet
Posted in Eurozone, Macroeconomics | Permalink