Tracking Bernanke

Kudos to Liz Rappaport, the Markets Columnist at, for putting together a terrific column on the flip flops of Fed Chair Ben Bernanke.

Here’s a chart of gentle Ben’s public statements that she put together:

Bouncing Bernanke:

A brief history of the new Fed chairman’s communication efforts
Event Key Comment(s) Perceived as Hawk or Dove
Nov. 16: Confirmation Hearing, Senate Banking Committee "In 2003, there was an episode where there was clearly miscommunication between the Federal Reserve and the bond markets
[regarding deflation risks]
, and it caused a significant fluctuation in the bond markets. Clearly there was a misunderstanding about that risk."
Hawk, or at least attempt to dispel dovish perception.
Feb. 15-16: Semiannual report to Congress
  • "A leveling out or a modest softening of housing activity seems more likely than a sharp contraction."
  • Not worried about the inverted yield curve — low long-term rates will keep the economy moving.
  • The policy response to inflation need not be as great as in the ’70s, even with the move in energy prices.
  • Not worried about the current account deficit, but would be concerned if it changed too rapidly.
  • Mixed
    March 20: Speech, Economic Club of New York
  • "I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come, for several reasons."
  • "To the extent that the recent behavior of long-term rates reflects a declining term premium, the policy rate associated with a given degree of financial stimulus will be higher than usual. But to the extent that long-term rates have been influenced by macroeconomic conditions, including such factors as trends in global saving and investment, the required policy rate will be lower."
  • Mixed, but interpreted as somewhat hawkish.
    March 28: FOMC Statement "Possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures." Hawkish
    April 18: Minutes of March FOMC meeting. "Most members thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy." Dovish
    April 27: Testimony, Joint Economic Committee
  • "At some point in the future the Committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook."
  • "Significant uncertainty attends the outlook for housing, and the risk exists that a slowdown more pronounced than we currently expect could prove a drag on growth this year and next."
  • Dovish
    April 29: White House Correspondence Dinner Tells CNBC reporter markets were "wrong" to react to his congressional testimony as necessarily telegraphing a pause. Bernanke says it’s "worrisome" people don’t see him as an "aggressive inflation fighter." (Chicken) Hawk
    May 10: FOMC meeting "The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information." Not as dovish as traders hoped.
    May 23: Q&A, Senate Banking Committee CNBC episode was "a lapse in judgment on my part." Maria Culpa
    May 31: Minutes May FOMC Meeting "…a number of factors augmenting the upside risks to inflation." Plus, FOMC considers 50 basis points. Hawkish
    June 5:
  • "core inflation…has reached a level that, if sustained, would be at or above the upper end of the range that many economists, including myself, would consider consistent with price stability and the promotion of maximum long-run growth."
  • "Some survey-based measures of longer-term inflation expectations have edged up, on net, in recent months, as has the compensation for inflation and inflation risk implied by yields on nominal and inflation-indexed government debt."
  • (Super) Hawk
    Source: FOMC Web site;



    The entire column can be seen here.

    Nice work, Liz!


    Market Suffers From Too Much Information
    Liz Rappaport, Markets Columnist
    The, 6/5/2006 5:43 PM EDT

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    What's been said:

    Discussions found on the web:
    1. Uncle Jack commented on Jun 7

      It’s too late. Too many people know him for his 2002 “helicopter” comment and will hold that up against him for his entire tenure.

      If confidence was what the market wanted, Bush picked the wrong guy.

    2. tjofpa commented on Jun 7

      Don’t look now, but another Fed Head crossing the wires saying “inflation risks are elevated” and “we’re not concerned about crashing housing”. Maybe Paulson is passing out the script. Gee, lets see; if we can jawbone comodoties down and the dollar up we won’t need to raise rates anymore. IMO there’s no chance of another hike in June unless Gold starts soaring again.
      Under 670/ oz => no hike over 670 = > hike

    3. Josh commented on Jun 7

      Yeah, because gold price determines how much I’m paying for groceries.

      100% chance of the fed increasing June rates. What will the market reaction be when its 50 bp instead of just 25?

    4. BR commented on Jun 7

      I sympathize with BB – he comes in at a difficult time and is unfairly slurred with the academic tag. The market seems to be missing Greenspan.

    5. M3 commented on Jun 7

      As far as I can tell, he’s been saying the same thing: “We may or may not raise rates.”

      He can’t get much more consistent than that…

      If he rose rates when core-CPI data was tame, he’d be crucified. If he paused on tame core-CPI data, he’s a wussy dove.

      In this situation, you’d have to ask, WWAGD? Probably the same thing.

    6. yc32 commented on Jun 7

      Unlike Greenspan, Bernanke seems to flip flop too much. I remembered somebody said that leaders have to appear confident to gain confidence of people, especially when time is tough and direction is not clear. If Fed is truly data dependent and wait to see where to go, Bernanke should not take a position quickly and then reverse it a few days later. Market and investors will eventually lose confidence in him, if not already. Keep everyone guessing is better than going back and forth with conflict messages.

    7. sblitz commented on Jun 7

      Bernanke is fine, the market, however, is a bit nuts. The market wants to believe the next tightening is probably the last and then, more importantly, begin the next great parlor game — “when’s the first ease”. While the market is focused on picking the top, it is missing the point. Short-term money is 100 odd basis points below nominal GDP growth, the banks are flush with cash, and the budget is in deficit. This combination has never crashed the economy and it won’t now. Back to Bernanke, he and his minions are in a tough spot — convincing the market that the economy is fine, that he is watching inflation, and would really like to hold funds just below, say 50bps below y-o-y NOMINAL GDP (as was done in the mid 90s). What else can he say but that the data will tell him what he should do. The market, however, reacts to each data point with a static perception of what the release means. The Fed doesn’t. So every time the market’s expectations move away, Bernanke et al has to bring them back. If you are trading the expectation component in the Fed funds futures, its been fun.

    8. Mark commented on Jun 7

      “Short-term money is 100 odd basis points below nominal GDP growth”

      Show me the math on that. 1Q figures only?

    9. Alaskan Pete commented on Jun 7

      Could one of you east coasters stop by the FED and tell them to please STFU for a couple days.

      I need to unwind some things into a bounce, and all that jibba jabba coming out of FED mouths is killin my bounce. Coal stocks down another 5% today after a 5% drubbing over last two sessions.

      Fahq you, Gentle Ben.

    10. B commented on Jun 7

      SPX, Dow and NDX want to rally. They are they laggards. If the bulls can organize their efforts maybe we can get smething going but the leaders are so damn extended we can’t seem sto stabilize more than a day or two. I’d say at this point unless we get some strength here PDQ, we have some more work before a rally.

      Not that it helps you, but I think Bernanke wants to be mealy mouthed. His transparency has and always will be taken advantage of by global risk takers and I’m sure someone has pulled him aside and given him that little talk.

      Btw, Venezuela, Mexico and Norway have started to accelerate their slide. They join the middle east. The oilers are dumping. Oil prices are likely soon to follow. Oil has been disconnected from fundamentals and trading on gasoline supplies. We now have more gas and oil supplies than anytime in the last ten years.

    11. Dan Green commented on Jun 7

      “Maria Culpa”. GENIUS!

    12. royce commented on Jun 7

      Bernanke’s view on inflation seemed pretty clear in his academic writings, and parsing his current language seems like a waste of time to me. Greenspan loved playing the oracle. Bernanke doesn’t seem interested in doing that, at least so far.

      I’d say Bernanke is going to get inflation back down below 2%. It’s just a question of whether he’s willing to take the heat from Wall Street and Congress that reaching that target will spark. And we won’t know that until we see him in action.

    13. sblitz commented on Jun 7

      for the person wanting to know the math, nominal year-over-year growth in the economy in the first quarter was 6.9% minus 5% fed funds….do the math. last year y-o-y growth was about 6.5%

    14. GRL commented on Jun 7

      Sounds like great minds think alike. From today’s WSJ editorial page:

      Economic Rehab


      * * * *
      Commodity prices remain elevated and the dollar continues to weaken; both suggest excess money creation. Moreover, the economy has not experienced a recession in over 45 years without the federal funds rate rising above nominal GDP growth. In the past year nominal GDP growth has been 6.9%, so with the federal funds rate at 5%, monetary policy is still accommodative.

      Nonetheless, the Fed is very close to a neutral monetary policy. Using nominal GDP as a target, and looking back historically, a neutral rate is likely close to 6%. If the Fed could get rates to this level soon, the economy could continue to grow based on underlying entrepreneurial activity and productivity — a rate estimated to be 3.5% or 4% per year. A neutral rate would also put a lid on inflation, stabilize the dollar and cap commodity prices, including oil. A 6% federal funds rate would be monetary policy nirvana.

      6% in ’06!

    15. Jack commented on Jun 8

      While Greenspan’s obfuscating kept the markets guessing through a lack of clarity, Bernanke, does the same, just with an overabundance of information. Nothing has really changed.

      I actually have a higher personal liking of Bernanke.

    16. jkw commented on Jun 8

      It might be even better than that. Greenspan’s every word was parsed for meaning. This is almost certainly a stupid game to play. Bernanke speaks so often that people might start to realize that they should just believe what he says rather than trying to parse minute differences between possible word choices. A single speech by anyone should not have a huge affect on the market (unless it is announcing something really serious, like Iran saying “we are shutting down oil transport through the Persian Gulf right now”).

    17. Economist’s View commented on Jun 11

      Fed Watch: Ascendancy of the Hawks

      Here is Tim Duy’s latest Fed Watch: Ascendancy of the Hawks, by Tim Duy: My time of capitulation has come. After the weak labor report, I would have thought a pause in at the next meeting a sure thing and

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