In front of the Senate’s Banking Committee today, Bernanke laid out his assessment of the economy including one bright spot (housing), and its challenges (employment, consumer confidence, manufacturing, and The Fiscal Cliff).
Unfortunately for the QE3-heads (kind of like Dead-heads or Parrot-heads), Bernanke gave no indication that the board was ready to pull the trigger, and that they will continue to “keep their options open” as they have been saying for the last month now.
As morning turned to afternoon though, the tide began to change. Suddenly, everything that had lost ground at the start of the Bernanke testimony turned around. The reasoning for this sudden change of heart boils down to the Q&A session the Senate had with Mr. Bernanke. After various questions about the Libor scandal, Bernanke was unable to avoid questions about additional easing, and was prodded to elaborate on what additional methods the Fed might use to stimulate the economy. Although the Fed may pass on QE3 this time around, they could pursue different measures to try and spur growth including cutting interest rates on excess reserves, verbal intervention including talking about future plans regarding rates and their balance sheet, or even using the discount window for additional lending purposes. Bernanke was careful not to tip his hand though,
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