Next week, we have round two in the new experience that is the Federal Reserve Chairman’s press conference, at 2:15 PM ET on Wednesday. And while the big decisions will be made in the days prior, the Fed could shed some light on whether or not this current slowdown is going to last.
It’s all about the “transitory” nature of what’s causing the slowdown, according to Deutsche Bank’s Carl Riccadonna.
From the March 15 meeting to the April 26-27 meeting, the description of the economic recovery was downgraded from being “on firmer footing” to “proceeding at a moderate pace”. Recently, Chairman Bernanke described the recovery as being “uneven” and “frustratingly slow”, and he noted that growth appears to be somewhat slower than expected. Hence, one of the more obvious modifications to the Fed’s economic assessment will likely be a more subdued growth profile. It will be important to note the degree to which the Committee attributes the recent soft patch to transitory factors, such as gasoline prices and Japanese supplier disruptions, as opposed to a more sustained slowdown. Chairman Bernanke’s remarks on June 7 suggested that he still favours the “transitory slowdown” explanation, although he did show some signs of tempering his expectations for growth in H2.
So if you’re looking for some more clarity on H2, you’re going to get it. Otherwise, don’t expect anything Earth shattering out of the FOMC meeting on the Bernanke.
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