In addition to giving a review of the state of the US economy, risks in Europe, his benign inflation outlook, and his 2 cents on fiscal policy, Bernanke in his testimony said “As always, the Federal Reserve remains prepared to take action as needed to protect the US financial system and economy in the event that financial stresses escalate.” In terms of possible action when OT expires at month end, he said “the committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate…” Markets are off their highs, $ is off its lows, and gold immediately sold off but all Bernanke did was basically say what Yellen, Williams and Lockhart said, they’ll act if needed and with less than two weeks before the next FOMC meeting, he wasn’t going to be more explicit. Also, we all have to admit to ourselves that the Fed is basically out of bullets and the bond market has taken over. This time the bond market has eased for them over the past few months in light of the global economy. When the time is right on the flip side, they will tighten for them in the years ahead. The Fed is just a lap dog now.
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