NEW YORK (Reuters) - Federal Reserve Chairman Ben Bernanke on Thursday said the central bank would spare no effort to boost disappointingly weak growth and lower unemployment but offered no details of steps monetary policymakers might take.
KEY POINTS: * “The Federal Reserve will do all it can to help restore high rates of growth and employment in a context of price stability,” Bernanke said in comments prepared for delivery to the Economic Club of Minnesota. * The Fed chairman said a rise in prices this year is likely to be transitory. * “We see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy,” he said.
MICHAEL CULLEN, CORPORATE BOND TRADER, WALL STREET ACCESS, NEW YORK:
“It’s similar to what Greenspan used to do, which is to kind of hedge himself. It seems like a hedge play. Obviously he’s done the right thing so far to stimulate the economy over the last three years, but I guess he doesn’t want to steal any thunder from the President tonight. Everyone’s waiting for the President to give a real, good, solid speech tonight. He’s got to deliver something strong and positive.
“You’ve seen a lot of price volatility in the three-day chart of 30-year Treasury prices. The euro had some trading volatility too. It all depends where risk goes here. If the S&P closes higher today, that will put pressure on Treasuries.”
MILTON EZRATI, MARKET STRATEGIST, LORD ABBETT CO., JERSEY CITY,
“Given the constraint in Congress, the Street doesn’t expect much from him. I don’t know how much lower they can drive yields down. The Fed has about $700 billion in Treasuries with maturities less than five years. They are probably not going to try to sell all of them. If they sell half, that’s probably not enough to move the market. Wall Street might find it to be a pretty empty gesture.”
WAYNE KAUFMAN, CHIEF MARKET ANALYST, JOHN THOMAS FINANCIAL, NEW
“Looks like stocks dipped a bit on the speech, but I think we need to wait to see what the real impact of the speech is. We’ll see if the sellers come back over the next couple of days.
“Bernanke said he thinks our problems are long-term, and I agree that’s true so long as our policies stay the same. If they change policies, I think we have a chance to fix things. I’d like to see changes to the tax code, our energy policy and to the regulatory environment.”
“I’d say it’s largely a non-event because it mirrors, for the most part, what we heard at Jackson Hole. He acknowledges the weakness in the economy and that it’s likely more than transitory and says the Fed is ready to do what’s needed. But we haven’t heard anything that moves the debate about QE3 forward. So in that respect, there’s perhaps a diminished chance that we won’t see any Fed action at this month’s policy meeting. That’s dollar positive and let’s bulls test its upside, particularly against the euro.”
JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE
“The markets are going to be disappointed in this and concerned that the Fed is only acknowledging the problems without offering any real solutions.”
MARKET REACTION: STOCKS: U.S. stocks add to losses BONDS: U.S. bond prices add to gains FOREX: The dollar extends gains versus euro