This morning’s comments from Federal Reserve Chairman Ben Bernanke could be read to suggest that, while the market may have been anticipating another round of quantitative easing, it’s not going to get it.
From Societe Generale’s Rudy Narvas (emphasis ours):
Another key takeaway is that Bernanke acknowledges now that the deflation risks have pretty much disappeared. This reduces the risk of any extension of QE2 or starting a QE3 significantly. At the same time, he views the current rate of inflation as still relatively benign despite recent upward pressure from commodity prices.
And, since the speech, the market has tanked, with the S&P 500 now down 1.2%, suggesting that investors may be pricing out another round of QE (note speech time at 10 AM ET).
But wait, during the same time period, gold has surged, suggesting investors may be worried another round of QE to combat high unemployment may be yet to come.
But what’s the more likely possibility? That, with the dollar higher too, this is all about increasing concerns over chaos in Libya and the Gulf.