Ben Bernanke Explains QE4 – Live Blog

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After the Fed announced QE4 and new guidance for keeping low rates, Ben Bernanke will meet the press and provide some explanations.

Follow the live blog of Bernanke’s presser.

Update: Gold Could Go Much Higher – Elliott Wave Analysis

19:00 Fed publishes economic forecasts – unemployment projections drop — more details coming.

19:03 GMT Press conference begins at 19:15 – All times are GMT.

19:05 EUR/USD is trading at 1.3085, USD/JPY at 83.17. You can watch the press conference here.

19:09 More details about Fed forecasts: unemployment rate in 2013: 7.4% to 7.7%, compared with 7.6% to 7.9%. The current unemployment rate is 7.7%.

19:10 GDP growth targets widened from 2.5-3% to 2.3-3%. PCE Inflation widened from 1.6-2% to 1.3-2%. Core PCE lowered from 1.7-2% to 1.6-1.9%.

19:13 Was the fiscal cliff taken into account? This will probably be asked by the reporters.

19:15 Press conference begins.

19:15 Bernanke says unemployment remains high, and that many have a part time job or have lost faith. There is a huge waste.

19:16 Inflation remains tame. Highly accomodative policy continues.

19:17 Committee seeks lower rates in its QE programs.

19:17 Bernanke says that there are no dates.

19:17 QE to continue until situation improves. This includes the unemployment rate, labor force participation that are all taken into account.

19:18 Bond buying will be flexible.

19:19 Qualitative guidance is better at this time. Bernanke quotes the guidance from the statement.

19:20 Accommodation will continue as long as needed. This makes policy more transparent.

19:22 Bernanke reiterates commitment to Fed goals. “Monetary policy not on auto-pilot”.

19:23 Fed could leave rates low even if unemployment rate falls under 6.5%

19:24 Bernanke lays out all the conditions for moving the rates: for example: drop in unemployment has to be sustainable, inflation trend and not current inflation will be looked at.

19:25 Also other employment figures will be examined.

19:26 We will not derail the economic recovery.

19:27 Questions begin: asset purchases are a less understood tool…

19:28 Rate increases are well understood.

19:29 The change in guidance doesn’t change the expectations. Going forward, we will “drop the date”.

19:30 Tying the policy to goals will help the public and financial markets.

19:30 “We had a substantial discussion” about changing the guidance.

19:31 Bernanke reiterates transparency cause in guidance change.

19:31 Inflation expectations are low. We are trying to clarify the connection between policy and targets.

19:32 The fiscal cliff is having effects on the economy.

19:34 We are assuming that the fiscal cliff will be resolved.

19:35 Q: Is this an additional stimulus? No, this is a continuation of what we said in September.

19:36 QE4: We have announced an initial amount, and we are ready to change that.

19:37 Policy is prone to changes…

19:38 Fiscal cliff will undoubtedly have adverse on the economy, and we can not offset that.

19:39 Regarding the terminology, Bernanke doesn’t regret coining the term, as this is a big issue. He also mentions low business sentiment, and connects it to the cliff.

19:40 Also a short term drop off the cliff would be bad for the economy.

19:42 About economic projections – long term forecasts give us some time.

19:42 No rapid increase in the economy – we will take a balanced approach.

19:43 Some increase in our balance sheet is consistent with our policy. Nothing will change the “time to exit”.

19:44 I’m hoping that Congress will do the right thing on the fiscal cliff.

19:45 Congress also needs to make a framework for a long term solution.

19:46 The inflation limit is for “protection”. The nubmers were based on the Fed’s models.

19:47 Emotional question: what happens to regular people if the US goes off the cliff? What should people do?

19:48 Bernanke: the part where I come from has been “economically challenged”. We are trying to help people everywhere.

19:49 Bernanke mentions foreclosure rate in addition to the unemployment rate.

19:50 Important that politicians come to an agreement.

19:52 Main reason is to give markets and people more transparency about policy.

19:52 Is the Fed policy following a path for raising the rates only in 2016? Bernanke repeats key points in the statement.

19:54 We prefer having credible forecasts, and that’s why we keep policy transparent.

19:55 I think we can manage the credibility issue. The best thing is the collective wisdom of the Committee.

19:56 We expressed our dissatisfaction of the labor market in September.

19:58 Is the message: we are doing what we can? Bernanke refers to different views on the committee.

20:00 What about more stimulus? Bernanke refuses to intervene in politics.

20:01 Bernanke hints that he wants more stimulus, given a long term path for the longer term debt.

20:02 We missed growth forecasts and underestimated the recession.

20:04 Economic forecasting beyond a few quarters is hard…

20:05 The central bank cannot control unemployment in the long run.

20:06 The long term unemployment rate is made by many other things and not monetary policy.

20:07 Normal unemployment rate is between 5% and 6%.

20:10 Bernanke discusses transparency. In the meantime, EUR/USD is sliding under 1.3070.

20:12: Q: Can the Fed run out of ammunition? A: We can always innovate more. We should be more proactive now, when we have the ability.

20:14 Question about the Volcker rule. A lot of work to do…

20:15 Political question from Fox News about future work as Chairman. No real answer from Bernanke.

20:17 Bernanke discusses changes in the participation rate – discouraged workers.

20:20 “I hope that markets won’t have to tank”.

19:21 Bernanke is analyzing the “complacent” market reaction to the fiscal cliff.

20:23 Question about the Fed credibility, and hint that the Fed is financing the government and debasing the dollar.

20:25 “The credibility has been good”.

20:26 AS a part of GDP, QE is not that big, and accommodation is necessary, not meant for fiscal policy.

20:27 EUR/USD continues falling, to 1.3063 now.

20:27 Q:Is the MBS effort not passed on to consumers? A: Our analysis suggests it takes time. We don’t expect a full passage.

20:28 Since September, mortgage rates have been falling. Other things are happening in the economy.

20:30 Most of the declines find their way to mortgage customers.

20:31 Press conference ends.

Background

The Fed will now buy $40 billion worth of MBS (QE3) each month, and $45 billion in treasuries (QE4). Operation Twist has ended.

The Fed also set guidance for changing the interest rate: an unemployment rate of 6.5% as long as inflation expectations remain under 2.5% in the next one or two years. The details are a big vague.

Here are 4 Reasons Why Fed Decision is Extremely Dovish – High Pressure on Dollar

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.