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Ben Bernanke Explains QE3 – Live Blog

The Federal Reserve announced QE3 in a form of open ended buys of Mortgage Based Securities of $40 billion per month. This comes on top of the existing Operation Twist and on top of an extension to the low rates pledge.

Ben Bernanke wrapped up the press conference and released some interesting statements. The highlights and the full transcript of the live blog is below.


  • Unemployment is a grave concern. Looking for general improvement in unemployment
  • Forecasts do not reflect new policy – actual member forecasts could be better.
  • Higher assets, including homes and stocks impact the consumers (wealth effect).
  • Policies always had an element of conditionality.  Accommodation  will continue even after recovery quickens.
  • If the fiscal cliff isn’t addressed, our tools are not enough.
  • Bottom line for Bernanke: QE provides meaningful support to the economy.
  • EUR/USD reaches 1.30 but retreats.

Live Blog

17:58  GMT All times are GMT. Bernanke begins talking at 18:15. Fed projections are published at 18:00.

17:59 EUR/USD at 1.2964, USD/JPY at 77.44. The dollar is weakening towards the presser.

18:00 Fed projections are updated  2012 GDP forecast downgraded but the outlooks for 2013, 2014 were actually upgraded. So were the unemployment forecasts also improved for 2013 and 2014.

18:03 EUR/USD ticks up to 1.2972.

18:05 Did the upgraded forecasts for 2013 and 2014 already include the impact of the new operations by the Fed?

18:08 Will Bernanke show enthusiasm to do more and more?

18:13 EUR/USD is at 1.2983 – only 13 pips to go.

18:15 Presser begins: unemployment is a grave concenrn.

18:16 Only half of the jobs lost in the recession have been restored. Many have given up. Skills are lost.

18:16 Unprecedented levels of  accommodation. Monetary policy cannot cure all economic ills.

18:17 Bernanke lays out previous actions and says there hasn’t been much progress. The committee became convinced in more action.

18:17 Bernanke repeats the main elements in the announcement.

18:18 He mentions buying homes and refinancing.

18:19 Bernanke declares that the Fed will do more if necessary. Inflation will be taken into account.

18:20 Low rates are expected at least until mid 2015.

18:20 Bernanke reads members’ projections, saying that also in 2015 unemployment will remain high.

18:21 Uncertainty remains high, including problems in Europe.

18:21 Bernanke moves to answering critics: The Fed doesn’t substitute the government in spending. The odds are strong that the actions of the Fed will decrease the national debt.

18:22 Low rates hurt savers, including retirement, but help others. For retirement, a job is necessary.

18:23 Despite drought and higher commodity prices, inflation isn’t high. The Fed remains serious about inflation.

18:24 Questions begin, EUR/USD still at 1.2990.

18:24 The idea is to quicken the recovery.

18:24 EUR/USD 1.30 is very close.

18:24 Communications are discussed

18:25 Even if recovery accelerates,  accommodation  will continue for some time.

18:26 Not enough jobs to bring down the unemployment. We need more progress. We think that the economy will be recovery will be seen at 2015.

18:27 EUR/USD hesitant at 1.30.

18:27 Our policies have had benefits for the economy, but monetary policy not a panacea.

18:28 Change in the forecast of 0.4% is according to new policies. We think we can get more.

18:28 We don’t have tools to solve the unemployment problem. Shifting to government once again.

18:29  Accommodation depends on economy progress. We think that policy will bring all rates down, and stock prices.

18:30 Making sure we won’t stagnate at high levels of unemployment.

18:31 We continue to work on communication tools to make sure the public understands.

18:31 EUR/USD so close to 1.30 but not crossing the line so far.

18:32 There are various rates, assets, home prices. If home prices begin to rise, consumers will feel wealthier and consume more.

18:33 Bernanke elaborates about the wealth effect related to stocks.

18:34 We’re looking for something that involves unemployment coming down in a sustained way.

18:34 We could purchase MBS, treasuries and use communication.

18:35 Why didn’t the committee place specific targets? Answer: We want a general improvement, not only a fall related to the participation rate.

18:36 No single unemployment number.

18:37 Not advocating anything to congress.

18:38 EUR/USD touches 1.30.

18:39 When the Twist ends we will be looking at everything including the economy to make new decisions.

18:40 Prepared to take action if economy falters.

18:41 What are your personal plans for the future? Answer: no answer on personal plans.

18:42 Fed is non partisan and non political. We don’t take these factors into account.

18:43 Bernanke discusses details related to Basel III.

18:44 Small banks are very well capitalized.

18:45 Does QE3 work? Are members afraid to speak out?

18:46 We have a good discussion with a range of views. We came to a broad agreement – 11 to 1.

18:47 Does negative commentary hurt the effectiveness of QE? Answer: Negative commentary is always going to exist.

18:48 What policy would you like to see outside the Fed?

18:49 Answer: Take care of the fiscal cliff. The CBO has suggested that unemployment would begin to rise and throw the economy into recession.

18:49 If the fiscal cliff isn’t addressed, our tools are not enough.

18:50 Regarding inflation, the economy fell very quickly and there is a lot of slack, so no overheating is expected soon. We follow inflation expectations.

18:51 Bottom line for Bernanke: QE provides meaningful support to the economy.

18:52 Bernanke hints again about responsibility of the governments.

18:53 A question about the Woodford paper. Bernanke says that communication is a powerful tool.

18:55 The amount of purchases will depend on the economy. This is a repeat.

18:57 The housing sector has been one of the missing pistons in the engine, and we are seeing some improvement.

18:58 EUR/USD retreats to 1.2985.

18:59 Has the fiscal cliff already hurt the economy?

19:00 A lot of firms are waiting to see if the fiscal cliff is resolved.

19:01 Fiscal cliff is an issue of some consequence.

19:01 Question about the impact of the fiscal cliff on the decision – there are many headwinds. Bernanke doesn’t really answer the question.

19:02 If the fiscal cliff occurs, the Fed doesn’t have the tools to encounter.

19:03 A decline in the participation rate is natural with an ageing population. In addition, women participation has  flat lined.

19:03 If the economy were to strengthen, discouraged people will return and the unemployment rate would even temporarily rise.

19:05 Unemployment is not only Non-Farm Payrolls.

19:05 Press conference ends. EUR/USD is at 1.2985. USD/JPY is stable at 77.47.


Expectations were very high for significant monetary stimulus from the Fed, despite the doubts about its effectiveness. The speech at Jackson Hole and the weak Non-Farm Payrolls convinced many that the Fed will do something. Bernanke used the word “grave” in regards to employment.

The high expectations are partly to blame for the relatively muted action. The dollar is generally weaker, but it didn’t crash. Here are three reasons why the dollar didn’t crash.

Yohay Elam

Yohay Elam

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.