By FXEmpire.com
The April FOMC statement differed only in a few, mostly unimportant details from the March one and contained no hint whatsoever of a change in policy. The Committee was slightly more optimistic on the economic outlook and was marginally more attentive to inflation, but at the same time upped its guard about the downside risks to growth due to financial strains. The changes to the current economic situation were minimal. Interestingly, the interest rate projections were more hawkish, but didn’t affect the FOMC rate guidance. Bernanke left the door for more QE open, but showed no bias towards the issue.
During the press conference, Bernanke underlined that the FOMC had acted bold and aggressively and is comfortable with the current accommodative stance. He, however, was equally firm that the Committee remained prepared to do more if necessary to attain its objectives. QE-3 was still on the table, he clarified. He downplayed the higher inflation and the upward revision in the lower boundary of the range of inflation projections.
When asked why he did not do more in terms of accommodation and thus implement what he had preached as a scholar of the Japanese deflation, he defended the bold actions the FOMC took, but also reminded that Japan was experiencing both deflation and recession. The US, he said, is not in deflation and not in recession. Creating more inflation to fasten the pace of decline in unemployment would be reckless and counterproductive, he added. The Fed doesn’t want to put its credibility and price stability on the line for some illusive gains in employment. However, he took care to repeat that incoming information would be taken serious and addressed accordingly.
Asked whether the Fed didn’t fear a disappointing reaction of markets when the operation twist ended, he remarked that the Fed’s actions were determined by inflation and growth and unemployment and not by disappointment or cheers of financial markets. He repeated that the Fed thought that the quantity of securities (stock), and not the additional purchases, influenced the monetary stance and thus was confident that the market’s reaction if the operation twist ended would be subdued
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Originally posted here
