Bernanke Reiterates ZIRP. Again.

Monday, November 16, 2009 , , 2 Comments

Poor poor Fed boys backed into that painful corner.


U.S. stocks rallied broadly to fresh 13-month highs on Monday after Federal Reserve Chairman Ben Bernanke reinforced expectations that interest rates would stay low to spur growth.

In a speech before the Economic Club of New York, Bernanke said the recovery would not be as robust as previously hoped, and rising unemployment and tight bank lending were significant headwinds.

He repeated that the Fed was likely to keep interest rates exceptionally low for "an extended period," a pledge that drove the U.S. dollar lower and drove investors to snap up shares of natural resource companies as prices of global commodities -- from gold to wheat -- shot higher.

Even though Bernanke made a rare statement on foreign exchange markets, saying the Fed was watching the U.S. dollar closely, the greenback found very little lasting reprieve.

The United States and China failed to reach an agreement over currencies at a summit of the Asia Pacific Economic Cooperation forum in Singapore.

Bernanke, commenting on the dollar's decline, said the Fed is attentive to changes in the U.S. currency and the Fed's mandate will help ensure the greenback remains strong.

"If you take away stimulus, this economy falls apart. He knows it. He's boxed in here, he can't raise rates. It's impossible," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "So what do we do? We continue to buy equities because that's what the trade is."

I sincerely hope that works out for them. Really.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


David said...

What makes journalists believe that market movements have anything to do with Bernanke's statements?

That's a great question, David. I think the better question is "when can journalists move on and acknowledge that Bernanke's statements no longer have the power to move markets?"

That's what I'm holding out for. I understand the behavior, it's conditioned.