The Only Question to Ask Ben Bernanke
Anyone who watches Bernanke’s Congressional testimony knows that lawmakers ignore his testimony because they’re too excited about Q&A—a chance to drill their vote-pandering messages in question form (e.g., Why does Fed help banks and not consumers?). Then Bernanke repeats the economic outlook and FOMC strategies he just laid out moments before. Today’s 2:15 ET press conference will be the same unless reporters ask about things the Fed actually controls.
Not much mortgage rate reaction from today’s FOMC statement confirming near-zero rate policy for an ‘extended period’ for bank-to-bank and Fed-to-bank lending, and also confirming the June 30 end of QE2. Now we just wait for Bernanke to reiterate today’s statement as well as recent meeting minutes, testimony, and speeches. So if reporters want to help readers understand the market outlook, ask this question:
When it comes to unwinding unprecedented rate stimulus, what do you start with first and why: (1) increasing interest the Fed pays on reserves?, (2) selling Treasury and MBS holdings from QE1 and QE2?, or (3) hike fed funds or discount rates?
Despite criticism that comes with the job, Bernanke is a maestro indeed, and far less obtuse than his predecessor. So if you ask that question, you’re likely to get a clear answer.
Don’t push some consumerist agenda by asking what will happen with jobs or housing. Bernanke doesn’t know that. Ask him about things he controls, like these three levers of monetary policy.
UPDATE: Very good questions today, including a series that covered our proposed question. Great to see financial journalists show political journalists and politicians how it’s done. As for Fed message, nothing different from the FOMC statements, minutes, testimony and speeches (see links). Fed can pull three levers noted when the economy starts improving, and their reaction is market dependent. So now we return to daily market data and technical analysis to help consumers understand and make decisions on rate markets.