Bernanke speech highlights January 3, 2014:
- QE taper not a signal about less devotion to easing
- ‘We should be cautious in our forecasts’
- Sees ‘less fiscal restraint’ this year and next
- FOMC to consider changing parts of operating framework, including new tools
- Return to normal policy can be achieved without asset sales; cites IOER and reverse repos
- Full text of Bernanke’s speech
The comments on IOER caught my eye but they’re about raising it, not cutting it in case of economic stagnation, which is an idea that’s out there:
The interest rate on excess reserves can be raised, which will put upward pressure on short-term rates; in addition, the Federal Reserve will be able to employ other tools, such as fixed-rate overnight reverse repurchase agreements, term deposits, or term repurchase agreements, to drain bank reserves and tighten its control over money market rates if this proves necessary.
Reading through his comments on the economy, he is carefully neutral. The market has barely budged on his comments. We’ll watch out for a Q&A.
