Ben Bernanke Accommodation Statement Sends Futures Soaring

By on July 11, 2013

Ben Bernanke - Federal Reserve ChairmanSeveral weeks ago Federal Reserve Chairman Ben Bernanke sent bond markets around the world reeling when he indicated a possible tapering of bond purchases in the coming year. This, in turn, caused a sizable sell-off in the stock market. Both markets have since stabilized.

After the market’s close yesterday Bernanke made a statement that the unemployment rate of 7.6% probably understated weakness in the labor market and inflation was only around 1%; below the Fed’s 2% objective. Both unemployment and inflation indicate the Fed needs to be more accommodative, Bernanke added.

Bernanke stated, “CBO estimates that current federal fiscal policy is subtracting 1.5 percentage points of growth from the U. S. economy this year; so you put that all together, and I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U. S. economy.”

Dow futures jumped more than 140 points and gold and silver gained $30 and 80 cents respectively after Bernanke’s comments. 10-year Treasury yields fell from 2.66% to 2.58%. International markets were also rallying strongly; especially emerging markets, which had been particularly weak in the past month and year-to-date.

2 Comments

  1. Captain Midnight

    July 12, 2013 at 1:44 pm

    Fed needs to make up its mind, but little corrections are probably a good thing.

  2. Maximus

    July 12, 2013 at 2:33 pm

    Anytime the market reacts Bernanke blinks and gives the cabal what it wants. A certain recipe for disaster!

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