ben bernanke

Robin Harding

The market thinks the June jobs report is taperific and that looks basically correct: at this pace of payrolls growth a September slowing of QE3 seems likely. But there are enough complications to make the market reaction – 10-year Treasury yield up eighteen basis points at 2.68 per cent – look over the top. Read more

When we look back on the FOMC meeting on June 19 2013, it will probably be seen as the moment when the Fed signalled that it was beginning the long and gradual exit from its programme of unconventional monetary easing. The reason for this was clear in the committee’s statement, which said that the downside risks to economic activity had diminished since last autumn, presumably because the US economy had navigated the fiscal tightening better than expected and the risks surrounding the euro had abated.

This was the smoking gun in the statement. With downside risks declining, the need for an emergency programme of monetary easing was no longer so compelling. The Fed has been the unequivocal friend of the markets for much of the time since 2009, and certainly ever since last September. That comfortable assumption no longer applies. Read more

Robin Harding

All markets want from Ben Bernanke when he testifies before Congress on Tuesday and Wednesday is reassurance that he is not getting cold feet about the Fed’s open-ended, $85bn-a-month, QE3 programme of asset purchases. That follows minutes which, while notably vague, showed “many” participants worrying about QE3′s costs and risks.

They are likely to get that reassurance — although maybe not in the most straightforward manner. It is important to note that, when Mr Bernanke testifies, he is speaking for the committee and not for himself. This is the statutory languageRead more

Ingram Pinn

To understand Ben Bernanke, it helps to set aside the ubiquitous pictures of today’s 59-year-old: the controlled beard, the pristine shirts, the worn-down weary look. Instead, search for a snap of the freshly minted graduate who gazes from the pages of the 1975 Harvard yearbook. Unlike the other young men pictured alongside him, Mr Bernanke sports no tie and no blazer. He has a loud checked shirt, long hair and a tremendous, rebellious handlebar moustache.

The moustache may be gone, but the US Federal Reserve chairman remains a rebel – and the world is better off for it. The Financial Times has already crowned its man of the year: Mario Draghi, the European Central Bank president. But my pick for silver medal is Mr Bernanke. The fact that he is sometimes pilloried only underlines his fortitude. Read more

Robin Harding

The most interesting part of Ben Bernanke’s speech today is what he says about the recession reducing potential growth in the US.

“The accumulating evidence does appear consistent with the financial crisis and the associated recession having reduced the potential growth rate of our economy somewhat during the past few years. In particular, slower growth of potential output would help explain why the unemployment rate has declined in the face of the relatively modest output gains we have seen during the recovery.”

This is quite a big evolution in Mr Bernanke’s arguments about the weakness of the recovery and why the unemployment rate has fallen faster than expected. This is from his March speech on the labour market:

“Notably, an examination of recent deviations from Okun’s law suggests that the recent decline in the unemployment rate may reflect, at least in part, a reversal of the unusually large layoffs that occurred during late 2008 and over 2009. To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”

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Robin Harding

Binyamin Applebaum at the New York Times has a good piece today about who Mitt Romney might appoint as Federal Reserve chairman and what that might mean. His analysis is similar to that of Macro Advisers, and I don’t have much to add, save that I think Glenn Hubbard or Greg Mankiw are more likely choices than John Taylor.

It is worth considering, though, how a more hawkish Fed chairman would interact with the rest of the FOMC. The seven Fed governors at present are:

Term expires Age Notes
Elizabeth Duke 2012 60
Jerome Powell 2014 59
Sarah Raskin 2016 51
Jeremy Stein 2018 52
Ben Bernanke 2020 58 Chairman until Jan 2014
Daniel Tarullo 2022 59
Janet Yellen 2024 66 Vice chair until Oct 2014

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Professor Michael Woodford of Columbia University is an extremely renowned macro-economist, and rightly so, but only recently has he occupied a central place in market thinking. Since his paper on US monetary policy at Jackson Hole, and the favourable remarks which Ben Bernanke made about him, everyone is trying to understand what his influence on the Fed might eventually mean.

His writing can be complex and intricate, which is in the nature of the subject, but his current policy recommendation is quite clear: the Fed should adopt a target for the level of nominal GDP which would have the effect of increasing price inflation, and inflation expectations in the period ahead, and thus reduce the real rate of interest.

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Claire Jones

The Federal Reserve’s decision last week to expand its balance sheet by a potentially unlimited amount until the labour market shows some “substantial” signs of improvement has been described as “stunningly aggressive” and “a dramatic step forward“.

But Charles Evans, president for the Chicago Federal Reserve, is not satisfied. The Federal Open Market Committee’s arch-dove wants more.

Mr Evans on Tuesday again called for the rest of the FOMC to explicitly target an unemployment rate of 7 per cent and medium-term inflation of 3 per cent before ending its easing policy – so long as inflation expectations remain reasonably well anchored.

Will the bulk of the FOMC’s voters back such a so-called ‘Evans rule’? For the time being, no.

But, for the most part, Mr Evans has already got what he wants. Read more

Robin Harding

Ben Bernanke, the Fed chairman, has replied to a series of questions from Congressman Darrell Issa, who chairs the House Oversight and Government Reform Committee.

The answers are mostly pretty unrevealing — a large percentage of them simply cite the Fed’s mandate — but if you share concerns about excess bank reserves, QE as a tax on savers, or exiting from easy monetary policy then Mr Bernanke’s responses are hereRead more

Robin Harding

There is some kremlinology going on about the Fed’s new easing bias language:

“The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

In the Greenspan era “closely monitor” was sometimes code for an intermeeting action by the Fed, notes Eric Green at TD Securities, via Business InsiderRead more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

Bernanke testimony

Fed chairman Ben Bernanke faces Congress next week for the central bank’s twice-yearly Monetary Policy Report to the Senate and the House of Representatives.

Will Mr Bernanke offer any clues that the launch of QE3 is imminent? This from the FT’s US economics editor Robin Harding: Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

Joint action?

Hopes for joint central bank action mounted on Friday ahead of Sunday’s Greek election. Will the central banks deliver?  Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

More QE from the Bank?

The Bank of England‘s Monetary Policy Committee meets on Wednesday and Thursday, when the decision is due out at noon UK time (11am GMT).

Will the MPC vote for more QE? Read more

Robin Harding

There’s probably nothing that would annoy Ben Bernanke more than being caught in a logical inconsistency over some aspect of monetary policy. At the Fed’s press conference today, he vigorously defended himself against Paul Krugman’s charge that the Fed’s recent actions are inconsistent with his academic views on Japan fifteen years ago.

The Fed’s interest rate forecasts, however, are getting the bank into a real bind: Read more

Robin Harding

The strength of the gross domestic income in the fourth quarter of 2011 – it was up by an annualised 4.4 per cent – has been widely remarked upon. The contrast with the weaker 3 per cent growth in gross domestic product is striking.

The rise in GDI invalidates part of what Ben Bernanke said in his labour markets speech only three days ago. Mr Bernanke said (my emphasis): Read more

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

ECB’s big bazooka

Next week’s main event is, of course, the European Central Bank’s second offer of cheap three-year loans.

Attention is fixed on whether the take-up will be greater or less than in December, when the central bank loaned €489bn. Read more

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

Bernanke testimony

Fed chairman Ben Bernanke is due to speak on the economic outlook and federal budget situation on Thursday. He’s up in front of the House Committee on the Budget at 10.00 local time (15.00 GMT) on Thursday. Read more


Ben Bernanke has been very focused on the Fed’s “communications strategy” for several years now, and has patiently pushed the FOMC in his desired direction during a series of detailed discussions. Now it seems that he has reached his destination, and will reveal all (or almost all) in his press conference after the FOMC meeting which begins on Tuesday. Always a fan of explicit inflation targets, the chairman seems finally to have won agreement from colleagues on establishing a formal objective for core inflation of about 2 per cent, though the FOMC will also need to keep Congress happy by talking about its long term unemployment objectives as well. More unconventionally, each member of the FOMC will also publish for the first time their projections for the Fed funds rate extending to 2016.

What is the motivation behind these changes? Mr Bernanke has normally justified such steps in terms of stabilising expectations about the Fed’s genuine intentions, especially on inflation and the forward path for interest rates. At a time when the extension of the balance sheet is causing political difficulties for the Fed, and when inflation expectations could become unhinged by the rapid expansion of the monetary base, the chairman is looking for alternative ways of easing monetary conditions without printing more money. Modern macro-economics suggests that operating on expectations is one of the most powerful tools available to him, though he is using it much more cautiously than many economists would like to see.

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Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

FOMC meeting

The Federal Open Market Committee meets on Tuesday and Wednesday to set monetary policy for the coming month and a half.

The meeting – to be followed by one of chairman Ben Bernanke’s press conferences – could see the FOMC announce an inflation target. This from the FT’s US economics editor Robin Harding: Read more

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe  Read more