Ben Bernanke vs. Marvin King

Marvin King:

It was at this press conference one year ago that I explained the asset purchase programme to you. That was at a time of sharply falling output and collapsing confidence. Since then, the position has improved considerably. Output has stabilised and confidence has recovered. The additional money created by the asset programme will continue to boost the economy for some time to come. But the nature of the headwinds means that the recovery is likely to be slow. And there is much uncertainty – about both the outlook for the world economy and the strength of domestic spending. Although the MPC last week announced a pause in its programme of asset purchases, it is far too soon to conclude that no more purchases will be needed. So the Committee will keep its options open, and further purchases will be made if they prove necessary to keep inflation on track to meet the target in the medium term.

Ben Bernanke:

The Federal Reserve may raise the discount rate “before long” as part of the “normalization” of Fed lending, a move that won’t signal any change in the outlook for monetary policy.

Although at present the U.S. economy continues to require the support of highly accommodative monetary policies, at some point the Federal Reserve will need to tighten financial conditions by raising short-term interest rates and reducing the quantity of bank reserves outstanding.

In short, they both have similar problems, one is sincere, one is bluffing.

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This entry was posted on Wednesday, February 10th, 2010 at 1:52 pm and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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