2013 Economic Calendar
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Fed Chair Speech  
Released On 7/17/2013 8:30:00 AM For 7/17/2013 8:30:00 AM

Federal Reserve Chairman Ben Bernanke (FOMC Voting Member) to testify before the House Financial Services Committee in Washington.

Fed Chairman Ben Bernanke’s prepared remarks were released at 8:30 ET although testimony remains scheduled for 10:00 ET. In prepared remarks, Bernanke stayed with most of his earlier comments on QE. Changes are data dependent and the Fed could even raise purchases if needed to support the labor market. He sees policy as accommodative even when asset buys end. Bernanke stated that purchases would slow later this year if the recovery continues as expected and purchases would end in mid-2014. The Fed chief said rates are unlikely to be raised if inflation expectations remain below 2.5 percent. He noted that policy is not on a pre-set course. He sees asset purchases continuing until there is substantial improvement in the labor market. On the economy, he focused on unemployment and underemployment are still too high even though there has been some improvement in the labor market.

During Q&A, Bernanke advocated the importance of a sustainable fiscal path, noting that there is too much focus on the short term. He is not certain how long sequester effects will last but expects fiscal drag to fade heading into 2014.

On the issue of guidance, Bernanke stated that not giving a QE timeline would have risked dislocating markets. The Fed chairman indicated that he believes markets are finally getting the Fed’s message on guidance.

He indicated that there are benefits to open debate on policy, including from differing views.

The Fed chief describes mortgage rates as still low but the Fed will need to monitor rising mortgage rates.

Regarding the unemployment rate, he believes the U.S. can achieve a long-term rate “in the 5s.” Bernanke noted that 7 percent in the QE timeline is not a target.

He stated that the Fed is targeting 2 percent inflation.

Bernanke emphasized that he sees the need for accommodative monetary policy “for the foreseeable future.” The reasons for continued accommodation are inflation being below target and unemployment being still high. He reiterated that if data are strong, the Fed could taper faster but if weak, could delay taper or even boost purchases. Bernanke noted that FOMC expectations for the recovery have not yet been confirmed by data. Regarding the weak housing starts report released prior to his testimony, he stated that he is not taking too strong a signal from the report.

On the issue of confidence, Bernanke said that good policies instill confidence in consumers and businesses.

On exit strategy, the Fed chairman said there will be no surprises as the Fed will communicate intentions. He also emphasized that the Fed knows how to exit and has the tools needed to exit without boosting inflation fears. Overall, Bernanke reaffirmed his view that loose monetary policy is needed for quite some time. Equities had little reaction to his testimony.

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