Stray Bernanke Comment Sweeps Market Off Its Feet
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The chairman of the Federal Reserve, Ben Bernanke, is getting a crash course in what it means to be the head of the world’s most powerful central bank.
Financial markets were blindsided on Monday after a CNBC anchor, Maria Bartiromo, reported that Mr. Bernanke told her investors were wrong in thinking that he’s done lifting interest rates. Stocks surrendered gains, bonds fell, and the dollar jumped in response to the remarks, which Ms. Bartiromo said were part of a conversation at the White House Correspondents Association dinner in Washington on April 29.
It isn’t clear exactly what Mr. Bernanke said; a Fed spokeswoman declined any comment. What is clear, Fed watchers say, is that Mr. Bernanke underestimated the scrutiny that anything he says, even in a social situation, will receive now that he’s chairman.
“The management of communication here and the way things were said has, I think, undermined a little bit of Fed credibility for now.” the chief U.S. economist at Bear Stearns, John Ryding, said.
The confusion over the Fed’s intentions comes at a delicate time for markets and the central bank. After 15 straight rate increases, investors are alert for any sign that the Fed is about to conclude its tightening campaign, the longest in more than a quarter of a century.
“We were swept off our feet” by CNBC’s report of Mr. Bernanke’s comments, a currency strategist at Westpac Banking Corporation in New York, Richard Franulovich, said. “Bernanke is still easing his way into the role and learning what he can and can’t say, and to whom. He won’t be speaking off the cuff to media people again. He’s probably learned a lesson.”
Mr. Bernanke, who became Fed chairman in February, told the Congress’s Joint Economic Committee on April 27 that the Fed may suspend the increases even if economic risks are tilted toward faster inflation. Policy makers meet to decide borrowing costs next week.