Photo: Bloomberg Television
The Federal Reserve made a mountain of headlines today, releasing its interest rate decision, growth expectations, and long-term policy projections.Fed Chairman Ben Bernanke spoke after those data and statements were released.
His press conference focused on two different things: clarifying the purpose of FOMC members’ policy projections and talking about how the Fed plans to address continuing weakness in the economy—its current outlook.
Bernanke repeatedly emphasised that the policy projections were subject to change and by no means will replace FOMC meetings. Indeed, the policies that the Board of Governors often endorses in those meetings is not adequately represented by the individual forecasts of members. Nor do the projections take into account unexpected economic shocks, shocks that often dictate new policy.
On some level, this new initiative remains fuzzy for investors, and their concerns that FOMC will become “mechanical” can only be substantiated (or not) with time.
Perhaps more interesting immediately was Bernanke’s reiterations that the Fed has more policy tools at its disposal. While he argued that this was indeed the case—and that another round of quantitative easing is certainly something the committee will consider if inflation stays “subdued” and unemployment elevated—he wasn’t exactly convincing. Beyond QE, he suggested that the Fed could reach further information on how FOMC policy would react under different circumstances, but the extent to which more information will serve as lasting policy acccommodation remains to be seen.
Check out our live coverage of that event below.