Bernanke – what was so dovish about his Q&A?

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OK, here’s my summary of what I thought was most dovish from Bernanke (by the way, the HUGE, big white candle on EUR/USD is a bit of a giveaway too :-))

  • Bernanke said that both sides of the Fed’s mandate are saying that they we need to keep being accommodative
  • He recognised that the unemployment rate understates weakness in employment market. This was a good point from Bernanke and emphasises that its not just the unemployment rate that the fed looks at for a guide to the health of the labor market, the unemployment rate is just a broad summary.
  • He said that even when the wind back of asset purchases begins the overall thrust of policy is still highly accommodative and rate hikes are not on the near horizon at all
  • He noted (again … so many of these things he said he and other Fed officials have already said, he must get tired of having to repeat himself so much) that 6.5% unemployment is a threshold, not a target – and that there wont be automatic rate hikes when unemployment hits 6.5 %
  • On inflation he emphasized the importance of the target range, and that the Fed doesnt want inflation too high OR low – that there are substantial costs of deflation. (And, in passing, my favourite line for the whole session – that trying to explain the dangers of low inflation to your uncle is hard.  LOLed at that one)
  • Said it was transitory factors that have brought inflation so low, and that these will pass (and a bit of hawkishness to round it off)

Author: Eamonn Sheridan

Eamonn Sheridan worked with Bankers Trust Australia for 13 years as a Spot foreign exchange dealer, trading across all major currencies and all time zones. He rose to a Vice President position, running spot operations during the busy European time, leaving the bank just prior to it being sold to concentrate on running his own business in the ‘real world’! The markets, however, had him hooked – he continued to trade equities, CFDs and then on to futures, giving him broad experience across financial markets. He is now active in FX and equity index futures as well as writing for ForexLive™. Eamonn is a graduate of The University of Melbourne in Australia and lives in New South Wales.


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Eamonn Sheridan


  1. The most important point, I think, was when he flat out said ” That uhm we have seen some tightening of financial conditions, if as I said, as I said in my press conferences and other places, that if financial conditions were to tighten to the extent that uhm, that they jeopardized the achievement of our inflation and employment objectives, then we would have to push back against that”

    Pretty unambiguous message about rising rates and dollar, I’d say..

  2. Sounds like Ben doesn’t trust the BLS number either…

  3. Hi Eamonn,

    Thanks for the summary of Benanke statement.

    So we should look for more dollars weakness thru the week,

    thxs Bill

  4. Thanks Ryan – agree

  5. HI Bill – I think he has set the tone, yes

  6. July chop continues :)

  7. Market Gets Breathing Space – Fed to Tapper Soon – July 11……..I am note sure about all the fuss and change in market sentiment as I did not find anything new. What is new about Bernanke’s statement as he said that Fed short term interest rate won’t rise. Tapering has nothing to do with interest rate hike, as both are meant for two different purpose. Tapering is necessary because Central Banks cannot print money forever, which is against all the economic norms, it is purely fiscal matter and hence, is solely government’s responsibility to take measures to correct the imbalance.
    I don’t want to discuss too much on the tapering subject because it will take its own course. I do believe that there is no change in Fed strategy, because the condition attached to tapering is growth led and labour market recovery is late announcement, which is not part of FOMC minutes. Therefore, it is matter of time that when it becomes effective, this September or next March, which is not relevant. What is more important is that Fed will definitively act? What is not known is that when will Fed act? If we take a closer look, the writing is on the wall, as few of the Fed members have indicated that its asset purchase could be halted immediately, half of the Fed members thought that it would be appropriate to end asset purchase by year end and the remaining members, which is in minority were of view to continue in 2014.
    Bottom line is that keep a close watch on US economic numbers, once we see continuation of strong US data market will start discussing Fed’s unwinding plan. US Treasuries will provide guideline, though differential between short maturities against long ones have narrowed after Bernanke’s speech, but do watch 10-years treasury yield that needs to comfortably fall, which I doubt, as I am expecting continuation of steepening of yield curve or wider gap between short maturity paper versus government paper of longer maturity that will indicate that market strongly believes in reversal and therefore, current move should be short lived.
    Since the opinion on tapering is divided, the tug of war between Bulls and Bears will continue for sometime before market will start to realize that it is the economic performance that will count in the end. What we should also not forget is that European Zone and UK economy is in dolls drum, Brazil is struggling. Further, higher oil prices due to ongoing Egyptian unrest and summer demand for oil in USA may put pressure on oil prices that could cause damage to the struggling Asian economies. Hence, we could witness some more uncertainty until market settles down and acts on real factors.

  8. Confused Bernanke succeeds in convincingly confusing the market..!!!

  9. Anyone out there who’s keen on stats know when we last saw a move on E/U like that. I’m guessing around December 2008?

  10. I agree NP. I know that a candle is not a candle until it closes, however today’s daily candle currently has an extraordinary long wick to the upside. I can not recall seeing anything quite like that before at the London open. I am sure that there has been though it is extremely unusual. Interest times!!!!


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