Bernanke: Fed Sticks to Stimulus Measures, but Changes Loom
After yesterday's meeting of the FOMC, investors are split on how soon the Fed's "loose money" policies will be scaled back. The central bank meets next on June 18.
Yesterday, however, Ben Bernanke emphasized that the central bank will continue its current stimulus measures, though he indicated that changes may be seen in the near future.
Tapering Could Be Seen as Soon as June
The latest FOMC minutes reported that “a number of participants” on the Federal Open Markets Committee this month favored scaling back the central bank’s massive $85 billion per month bond-buying program. The minutes did, however, reveal certain concerns about unwinding such a large scale policy:
A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome.Bernanke’s testimony before the Senate’s Joint Economic Committee reiterated the FOMC’s statement, though the Chairman was quite adamant that he simply “does not know” when and by how much the central bank will change its stimulus measures. Further commentary pointed toward the Fed having some kind of plan in place, but deciding when to pull the trigger still remains uncertain.
For Bernanke, one of the key issues the bank must assess before any policy change is the state of the labor market; the Chairman noted that while recent economic data has been encouraging, the job market remains weak.
Though investors are still split on how soon the Fed will take action, it will be crucial to pay close attention to the next few FOMC meetings to see exactly how the central bank will scale back its “loose money” policies. The central bank meets next on June 18-19.
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Editor's note: This article by Daniela Pylypczak was originally published on Commodity HQ.