NEW YORK (Reuters) - Federal Reserve Chairman Ben Bernanke on Friday stopped short of signaling further action to boost growth, but said it was critical for the economy’s health to reduce long-term joblessness.
WORD CLOUD: r.reuters.com/qyt43s
KEY POINTS: * “It is clear the recovery from the crisis has been much less robust than we had hoped,” he said in remarks prepared for delivery to an annual Fed retreat. * Bernanke said the Fed will meet for two days in September instead of the planned one to mull its options to provide additional monetary stimulus, among other topics.
“He was rather boxed in terms of what he could say. The markets have been increasing pressure on him to say more, but he needs to take the FOMC with him. The fact that there’ll be a two-day meeting of the FOMC is interesting and shows the Fed is prepared to combat some of the dissents on the FOMC. But whether they go for more stimulus is in the hands of the data.”
“If he had said a lot, it would have made one more concerned. It provides some level of comfort. Things aren’t as bad as some people believe. The markets obviously don’t like what he said. The market was clearly pricing in some news.”
“It’s pretty much as expected in terms of not using this opportunity to signal anything. The fact that equities are selling off is helping Bunds because part of the sell-off in fixed income was partly in response to the better tone in risk assets, which was in the hope rather than the realistic expectation that something would be coming from Bernanke.”
“The Federal Reserve Chairman may have left the door open for more easing measures, but he has given the markets nothing concrete this morning.
“It appears the Fed has stepped back, leaving us to await efforts from the White House and Congress, if any, to bolster the economy. This is a bearish development.
“The markets needed more to maintain the recent gains either from QE3 or of the purchase of longer-dated Treasury securities. We have gotten nothing, and prices will slide as a result.”
“The speech doesn’t change much. U.S. consumer and manufacturing data due out next week is going to be much more important.... When Latin American markets saw a lack of concrete measures (during Bernanke’s speech), they fell to a minimum, but they’re recuperating already.”
ROBERT ENGLE, NOBEL PRIZED ECONOMIST, AT A DERIVATIVES SEMINAR SPONSORED BY BM&F BOVESPA EXCHANGE IN CAMPOS DE JORDAO, BRAZIL:
“I don’t think there’s much he can do about it. We need fiscal stimulus and monetary policy has done as much as it could do.
“I see uneven signs of growth across the world. The U.S. and Europe will continue weak. Emerging markets, which have been powerhouses the recent years, will keep growing albeit at a slower pace.”
“People who were holding out for a QE3 package from Bernanke were obviously disappointed and that’s the reason oil prices moved lower as headlines on the Bernanke speech came out. But the Jackson Hole, Wyoming, fireworks may not be over. ECB President Jean-Claude Trichet will still speak and after Bernanke’s remarks, it looks like there will be pressure on him (Trichet) to say how euro zone debt could be placed under control.”
BILL O’NEILL, PARTNER, LOGIC ADVISORS, UPPER SADDLE RIVER, NEW JERSEY:
“On balance it’s a disappointment if you were looking for anything dramatic.
“This speech didn’t really give us anything dramatically new and most importantly, it didn’t give us any real indication where we might look for something new as far as policy is concerned.
“Gold is going to continue to focus on Europe and on the uncertainty there, and it is going to form a nice base and gradually start to move higher.”
ALFREDO BARBUTTI, ECONOMIST, BGC LIQUIDEZ, THE SAO PAULO UNIT OF U.S. BROKERAGE BGC PARTNERS LTD.:
“I think its going to take a while for the market to digest these comments. One thing is clear, he is saying that the economy is likely to get worse before it gets better.
“There was no magic trigger here. He does not appear to want to act on his own. I sense he is trying to say that people need to act together and that things will have to get worse before people take coordinated action again like they did in 2008.”
BILL O’GRADY, CHIEF INVESTMENT STRATEGIST, CONFLUENCE INVESTMENT MANAGEMENT, ST. LOUIS, MISSOURI:
“I’m surprised at the the negative reaction in the equities markets to Bernanke’s speech. This was well-signaled that he was not going to say anything about QE3. This lack of action is not a negative for equites markets, since equities can still post earnings growth in a down market. It is bad for commodities markets, however, since commodities need economic growth to improve. For oil in particular, the outlook is bearish, since we are coming to the end of driving season with low consumption and high stockpiles.”
FRANK LESH, FUTURES ANALYST AND BROKER, FUTUREPATH TRADING LLC IN CHICAGO:
“There wasn’t much there but I didn’t think that there was going to be. I didn’t seem like the right venue for them to make policy announcements despite all the media push for one.
“I don’t view it is as that much of a disappointment. He also told us that you’re going to have wait until to September for the proper time for them to make a policy announcement.”
JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK, CHICAGO:
“I thought that the rallies earlier in the week were kind of a build-up to some new announcement. So I kind of felt that at least reading the tea leaves that investors were left wanting. The problem is the intractability in Washington leaves the fiscal alternatives pretty much on the sidelines.
“Stocks were down a lot, so it seems like somewhat of a muted response to the non-event. It’s hard to know what investors are thinking, but perhaps it’s buy the rumor, sell the news ... I think that now, he’s obviously passed the ball back to Washington.”