Bernanke speaking at the NABE conference is saying little new compared with his talk last week at GW and the statement given at the March 13th FOMC meeting. He is reiterating his belief that while the unemployment rate has fallen, which is obviously welcome, he is not convinced by its sustainability and remains uncomfortable still with the state of the labor market. He thus believes the extraordinary Fed accommodation currently in place should remain so. He specifically talked last week at GW the Fed’s error, in his belief, of tightening policy too early in the 1930’s that gave us a 2nd downturn in 1937. There is no hint whatsoever though in his speech today that the Fed is about to embark on another round of money printing. The Fed will thus continue with their asymmetrical policy of Defcon 1 monetary policy when things turn bad and then sit there still even as things turn dramatically better. The US economy is certainly still not out of the woods but Defcon 1 is where we are not.
