What Did Bernanke Say Yesterday? What Does It All Mean?

Fed Chief Ben Bernanke spoke yesterday about interest rates and the economy.

Markets continue to think about what Bernanke said yesterday at his press conference, Bernanke is to be lauded for his willingness to stand up with reporters and provide some additional clarity about what the Fed is thinking about raising rates. He said it would take at least two more FOMC meetings before the Fed considered any tightening.

There was a lot to consider from his comments but the most intriguing comment was " Its not clear we can (the Fed) get substantial improvements in payrolls without some additional inflation risks, and in my view we can't achieve a sustainable recovery without keeping inflation under control". What that means to markets remains to be answered; keep unemployment high and keep inflation under control, or do things that lower unemployment and send interest rates higher?


As Bernanke spoke yesterday gold and oil prices exploded and the dollar was racked with more selling against the euro. Investors and traders continue to run to safety, a little into US treasuries but a huge run to gold as the outlook remains muddled to say the least.

Employment isn't likely to improve much, US debt increasing is an increasing concern in global markets, inflation in the rest of the world is increasing while the US refuses to admit it, consumers are tightening discretionary spending as gas price, food prices, and price increases are beginning to be passed down to consumers and it isn't just food. The Fed still thinks commodity prices and energy price increases are "transitory" without definition as to what that means in terms of time.

Bernanke admitted emerging markets are continuing to expand, yet somehow he appears to believe that the demand from those emerging markets for food and energy will not push US inflation higher and commodity and energy prices will decline.

As always, it will unfold as it will....and we will all be affected in one way or another!