Investors usually listen in closely for any hints that the central bank head could drop about future monetary policy and the message from Bernanke today was clear - the Fed stands ready to respond with more stimulus if needed. No one expected Bernanke to mention more QE directly which explains why the dollar fell aggressively after he said the Fed is prepared to respond with stimulus if needed. Although he still tried to straddle the fence by saying that the economy may also warrant less accommodation, these words were lost on the market as Bernanke's emphasis on the ways the Fed could ease implies that the door is wide open for more QE. According to the Fed Chairman, there are 3 different ways for the central bank to increase stimulus - 1) extending the low rate commitment 2) buy more securities and 3) cut interest paid to banks on reserves to encourage them to lend more.
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