Ben Bernanke’s January 25, 2012 Press Conference – Notable Aspects

On Wednesday, January 25, Ben Bernanke gave his scheduled press conference.

Here are Ben Bernanke’s comments I found most notable, although I don’t necessarily agree with them.  These comments are excerpted from the “Transcript of Chairman Bernanke’s Press Conference“(preliminary)(pdf) of January 25, 2012, with accompanying economic projections (pdf).

Bernanke’s responses as indicated to the various questions:

Opening Remarks:

from page 5 :

The longer-run projections shown…represent participants’ assessments of the rate to which each variable converge over time under appropriate monetary policy, and in the absence of further shocks to the economy.

from page 7 (with regard to the initial increase in Fed Funds target rate) : 

Six participants anticipate that policy firming is likely to commence in 2015 or 2016 while five others depict policy firming to commence in 2014. The remaining six participants judged that policy lift-off would be
appropriate in 2012 or 2013.

from page 8:

In particular, the Committee recognizes that hardships imposed by high and persistent unemployment in an underperforming economy and it is prepared to provide further monetary accommodation if employment is not making sufficient progress towards our assessment of its maximum level or if inflation show signs and moving further below its mandate consistent rate.


from page 8:

Steve Liesman: Thank you. Steve Liesman, CNBC. Mr. Chairman, we’ve had several months of economic data that’s been stronger than most forecasters expected. Employment was over 200,000, unemployment rates come down 8 1/2 percent. But there seems to be very little mention of this recent strength in the statement. Do you and the Committee, Mr. Chairman, harbored doubts about the recent strength in the economy? And are you and the Committee baking in additional quantitative easing in order to achieve the growth rates that you’ve even forecast here? Thank you.

Chairman Bernanke: Steve, there have certainly been some encouraging news recently. We’ve seen slightly better performance in the labor market. Consumer sentiment has improved. Industrial production has been relatively strong. So there are some positive signs, no doubt. At the same time, we’ve had mixed results in some other areas, such as retail sales and we continue to see headwinds emanating from Europe coming from the slowing global economy and some other factors as well.  So, you know, we are obviously hoping that the strength we saw on the fourth quarter and in recent data will continue into 2012 but we’re going to continue to monitor that situation. I don’t think we are ready to declare that we’ve entered a new stronger phase at this point and we’ll continue to look at the data. We will, as I’ve said in my statement, and as we have in fact in the FOMC statement, you know, we continued to review our holdings, our portfolio holdings, securities, and we are prepared to take further steps in that direction if we see that the recovery’s faltering or if inflation is not moving towards target. So, that’s something as an option that’s certainly on the table. I think it would be premature to say definitively one way or the other, but we continue to look at that option and if conditions warrant, we will certainly consider using it.

from page 24:

Darren Gersh: Darren Gersh, Nightly Business Report. Let me kind of follow up on Peter’s question, why shouldn’t somebody looking at these numbers from the outside say, “look, as aggressive as you say you’ve been, as aggressive as you have been, it doesn’t look like you’re meeting any of your goals the next three years on the economy, so, why isn’t the Fed doing more now?”

Chairman Bernanke: Well, again, as I said earlier, the Fed has been doing a great deal. Just since August we have put a date on our expected period of low interest rates. We undertook the maturity extension program which is still continuing. Today, we announced a further extension of the expected period of low rates by issuing these expected policy rate information, we hope to convey to the market the extent to which there is support on the Committee for maintaining rates at a low level for a significant time. So, you know, I don’t accept the premise that we’ve been passive, we’ve been actually quite active in our policy and in one respect, the low level inflation is a validation in the following sense that there were some who are very concerned that our balance sheet policies and the like would lead to high inflation. There is certainly no sign of that yet and it hasn’t shown up either in financial markets or in outside forecasters’expectations. Now that being said, as I mentioned earlier, if the situation continues with inflation below target and unemployment declining at a rate which is very, very slow, then more, our framework, the logic of our framework says we should be looking for ways to do more, it’s not completely straightforward because, of course, we’re now dealing with a variety of nonstandard policy tools, we can’t just lower the federal funds rate 25 basis points like in the good old days but your basic point is right that, you know, we need to adopt policies that will both achieve our inflation objectives and help the economy recover as quickly as is feasible and I would say that your question, actually and earlier question, shows a benefit of explaining this framework because the framework makes very clear that we need to be thinking about ways in which we can provide further stimulus if we don’t get some improvement in the pace of recovery and normalization of inflation.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1316.33 as this post is written