Live Blogging the Bernanke Presser
The first-ever post-Federal Reserve meeting press conference is a momentous event in the history of U.S. monetary policy. In fact, it's so momentous that I thought it warranted some live blogging. So as the event takes place, see my commentary and analysis below, in reverse chronological order. And refresh often to see new updates. We've also included the video feed below, for your viewing pleasure.
3:15: The press conference lasted about 57 minutes. It probably could have been shorter, really. It was clear that reporters were mostly asking questions that either we already knew the answer to, or Bernanke had no intention of actually answering. This month, in particular, there really wasn't any room for misinterpreting the Fed's statement. A press conference like this would really only be useful if the Fed is changing policy in some significant way. Then, reporters could ask questions that might clarify its motivations and how it intends to affect the market. But if nothing else, it was amusing to watch. Bernanke seemed poised up there. There's no doubt that he made he made the Fed's public relations department proud.
3:12: Financial crises result in a slow recovery, says one reporter. How is the Fed helping? Bernanke points to the problems that the crises cause in credit markets, which the Fed helped with. He says he thinks policymakers responded swiftly to try to make the recovery faster than it would have been. There are still challenges, however, like housing. As long as that remains weak, a quick recovery is hard. He thinks the pace will pick up eventually, and the U.S. will return to being one of the fastest-growing and most dynamic countries in the world. And Bernanke ends on that optimistic note.
3:07: Someone asks why the Fed is holding its first news conference. He says the Fed has been looking for ways to increase transparency. He goes through some, like releasing the minutes, projections, etc. This is another step in that process. Anyone else think that Rep. Ron Paul (R-TX) probably isn't impressed?
3:05: A foreign exchange question. If the dollar sinks, would the Fed change monetary policy? Bernanke says, again, their tactics are strengthening the dollar by keeping inflation low and strengthening the recovery. It seems to me like the reporters have run out of questions.
3:03: Is it possible that the Fed's policies could be providing the "tender" for inflation even if expectations aren't changing? Bernanke says again that the Fed knows what it's doing. It's amazing how confident he is that the Fed is going to control inflation during it's exit from its massive stimulus resulting from the financial crisis rescue. If he's wrong, he won't be able to escape criticism, because he's almost outspoken in his confidence. Lets hope he's right.
3:00: This is going pretty much how I thought it would. Bernanke has yet to reveal anything new. He is clarifying economic theory and reiterating what we already know from the statement, papers, and remarks by Fed officials in the past. He's doing pretty well up there staying on message and not deviating.
2:58: How are global uncertainties affecting the U.S. economy? Bernanke says to wait for the minutes. The Fed does see quite a bit of uncertainty out there still, says Bernanke.
2:57: In past history, fiscal policy has sometimes tightened and the Fed has loosened in response. This time around, if Washington cuts spending, can/should the Fed do anything if there are large budget cuts in the next 18 months? Although Bernanke wants leaders to address the long-run issue, he would prefer deep budget cuts not to be short-run driven, as they could negatively impact growth.
2:55: Fox Business asks about S&P's recent action to put U.S. debt on negative watch. What's Bernanke's reaction and is he concerned about it? In one sense, S&P's action didn't tell us anything, says Bernanke, because we all know the U.S. has a long-term fiscal problem. But he's hopeful the event will provide one more incentive for Congress and the administration to address the problem. Sounds to me like he approves of S&P's action.
2:53: What about the problem of long-term unemployment? Bernanke agrees it's a huge problem. This is one of the reasons why the Fed has been so aggressive. I say that this is a silly question. The Fed can't do anything to target long-term unemployment. It doesn't have that kind of power. Bernanke kind of says this at the end of his answer.
2:51: Dow Jones asks: What's the right response if higher gas prices persist? Bernanke thinks oil prices will stabilize or come down. If that happens, then all will be well. But ultimately, it depends on inflation expectations. It sounds like Bernanke is essentially saying here the Fed will do nothing to respond to high gas prices unless they begin to change inflation expectations.
2:49: Why not do more easing then? Bernanke worries about the trade-offs. Inflation expectations are growing. He doesn't think hiring will ramp up much without seriously raising inflation risk with more monetary stimulus.
2:48: Some economists say the latest round of monetary stimulus hasn't done enough. Has it? Bernanke thinks so. He points to the financial markets being more conducive to business, like rising stock prices and more favorable conditions to lending. He says that history shows us that better financial market conditions should lead to better economic conditions. More tangibly, he points to better hiring and higher earnings estimates. The program isn't a panacea, says Bernanke, just an important step in preventing a double dip and deflation. Set the economy in the right direction for recovery.
2:46: Can the Fed reduce unemployment more quickly? If so, how? If so, why aren't they? Bernanke responds that the Fed actually has taken extraordinary measures to combat unemployment. This is a point that most people forget, which I would have expanded upon. If the Fed didn't step in to calm the financial crisis, unemployment would likely have climbed well past 12%. It kept credit flowing, without which layoffs would have been much more severe. Bernanke says that going forward, the Fed will continue to try to worry about employment, but it also has to worry about inflation. In other words, if inflation expectations rise, then the Fed will be powerless on unemployment.
2:43: What will be in the impact on rates when the Fed ends its bond buying program? And also how long will they reinvest maturing securities? He reiterates the bond buying program will end after June. The Fed believes the end of the program is unlikely to have significant effects on financial markets or the economy. He says that's because the markets anticipate the change. That sounds good in theory, but if the market won't miss the program, did it really change anything? He also says the size of the Fed's portfolio matters more than the amount that it consistently purchases. Tell that to the massive supply of Treasuries that needs buyers. He says the reinvestment will stop early in the exit strategy, but doesn't give any color on actually timing.
2:40: Financial Times asks how to prevent the public from assuming that higher inflation is coming. Inflation expectations are very important, because they drive actual inflation. Bernanke maintains the claim that medium-term inflation expectations haven't moved much, and that the Fed will ensure that doesn't change. All the Fed can really do is communicate to the public that it's committed to keeping the price level steady. If expectations do jump, the Fed must respond, he says.
2:38: Bloomberg asks: How do we know when we're in a period of sustained job creation? Are we yet? He doesn't give a clear answer, but says that the labor market is improving, but the pace of improvement is still quite slow. Still not in good shape, and hiring needs to pick up.
2:36: Next question asks about the problem of high gas prices and for more color on why inflation expectations changed. Bernanke agrees that high gas prices are a problem. He points to supply and demand for the reason for oil prices jumping. Demand is rising (particularly from emerging markets), which is pushing up prices. And he refers to Middle East unrest for supply problems. He says that's what's pushing up the inflation forecast in the short-term. He also says the Fed is powerless on gas prices. He says the Fed can't create more oil or control the growth rates of emerging markets. What they can do is try to prevent higher gas prices from pushing up other prices. See Relative Prices.
2:33: Steve Liesman from CNBC asks a question which cannot be heard over the live feed. Something about keeping the dollar strong. Sort of similar to the last question.
2:31: Someone asks about the Fed weakening the dollar and how that affects Americans. Fed defers to Treasury, who he says is responsible for the health of the dollar, but says that the dollar is safe. They're maintaining low inflation and trying to strengthen the recovery by achieving maximum employment. Put another way: Bernanke says its efforts are strengthening -- not weakening -- the dollar. Then adds "in the medium term." I wonder what about the long term.
2:30: Well, he did say at least at least a "couple meetings" for when he might change the "extended period" language. But that's not really shocking or even helpful to anyone who pays attention to this stuff.
2:29: Next question asks for the best guess for when the Fed might begin its exit. No way he's answering this concretely. As expected, he says they want to see continued improvement and more jobs. Of course, inflation is also being watched. In other words, we'll start pulling back when we think it's time that we start pulling back.
2:28: Questions! First, someone asks what's causing the weak growth despite the Fed's stimulus. Fed's expecting a relatively weak number, under 2%. We'll know tomorrow for sure when it's reported. Bernanke says the effects causing low growth are "transitory" like weaker exports due to global unrest and less defense spending. Some factors will have longer-term implications, like weak construction spending. That's why the Fed has lowered its expectations for GDP.
2:25: Unemployment expectations for 2011 a little better at 8.4% to 8.7% now, compared to 8.8% to 9.0% estimated in January. Inflation is expected to be significantly higher this year ranging from 2.1% to 2.8%, compared to 1.3% to 1.7% estimated in January.
2:24: Here's a direct link to the new projections (.pdf).
2:22: Business spending should continue to expand; consumer spending weak; housing weak. Unemployment problem is getting a little better. The Committee expects a moderate recovery to continue through 2011, with new growth expectations for 2011 and 2012 of 3.1% to 3.3% and 3.5% to 4.2%, respectively. That's from 3.4% to 3.9% and 3.5% to 4.4%, estimated in January. So they're a little more pessimistic.
2:19: Projections. Longer-run projections for growth unchanged from January at 2.5% to 2.8%. The longer run projection for the unemployment rate are now 5.2% to 5.6%, narrower than in January, when they were 5.0% to 6.0%. Price inflation estimate essentially unchanged at 1.7% to 2.0%.
2:17: Statement took about a minute to explain, which makes sense, since nothing new was revealed. Now we're on to the projections.
2:15: The chairman has arrived. Interesting that he's sitting. He's starting with the statement, then moving to the economic projections. So no questions for a while.
2:10: Over 5,000 viewers via the Fed's website link already. That doesn't include all the other outlets that will have it like C-SPAN, CNBC, etc. Starts in 5!
2:07: The stream is up and running. Are you ready? Are you excited? No? Then what kind of monetary policy geek are you? At any rate, here we go! (I'm guessing Bernanke will start by providing the Fed's latest economic projections.)