Photo: Bloomberg Television
We’re already excited for next week. On April 24-25, the Federal Reserve is holding its next meeting, and at the end Ben Bernanke will be giving a press conference.Nobody expects any more easing to be decided or announced at the meeting, but his press conference will be huge in terms of hints about what’s coming next, and whether QE3 will be launched at the following meeting.
Wall Street is really split on this issue right now. Some houses think QE3 is in the bag. Others not so much. Every tick in markets, and drib of economic data from here on out will help influence the decision.
Here’s Nomura on what they’ll be looking for at the press conference.
Chairman Bernanke will begin his press briefing by presenting a summary of FOMC participants’ economic projections. The press conference offers Chairman Bernanke the opportunity to characterise the outlook and associated risks in a way that will suggest whether he is leaning toward more accommodation or whether he is comfortable with the current level of accommodation. Recent speeches from Vice Chair Janet Yellen and San Francisco Fed President John Williams suggest further deterioration may be needed to warrant further easing. Similar sentiment from Mr. Bernanke would indicate that information received since the January meeting was sufficient to move him into wait-and-see mode as well.
In January, the Chairman said, “If the recovery continues to be modest, and progress on unemployment very slow, and if inflation appears to be likely to be below target for a number of years out…then I think there would be a very strong case based on our framework for finding additional tools for expansionary policies or to support the economy.” We do not anticipate an explicit signal of further accommodation to follow “Operation Twist”, but do expect a pronounced easing bias in Chairman Bernanke’s answers to reporters’ questions. We will attempt to gauge his thresholds for further easing and assess how low or high the bar is for “QE3”, in his view.
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