Bernanke Maintains Status Quo, Stocks Sell-Off
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Federal Reserve Chairman Ben Bernanke kept the status quo during his speech in Minneapolis today. The Chairman said while additional stimulus is being considered, he would not lay out any details of what if would look like if acted upon. He also again pointed to fiscal policymakers to engage in constructive pro-growth strategies.
Bernanke said:
"In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. My FOMC colleagues and I will continue to consider those and other pertinent issues, including, of course, economic and financial developments, at our meeting in September and are prepared to employ these tools as appropriate to promote a stronger economic recovery in a context of price stability."
While most market participants expected a non-eventful speech from Bernanke, traders used its as an excuse to sell.
Although Bernanke didn't discuss specifics of additional monetary easing, there is a growing belief that Bernanke and other Fed members will push for "Operation Twist" at the September 20 and 21 FOMC meeting. Under this potential plan the Fed's balance sheet composition would shift to longer-dated maturities. This would be done by selling short-term securities and buying longer-term securities and would have the desired result of lowering longer-term interest rates. This option would also not come with much political tension, as it would not require additional "money printing."
Going into the close, the Dow is down 86 points, the Nasdaq is down 16 and the S&P 500 is down 11.
Bernanke said:
"In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. My FOMC colleagues and I will continue to consider those and other pertinent issues, including, of course, economic and financial developments, at our meeting in September and are prepared to employ these tools as appropriate to promote a stronger economic recovery in a context of price stability."
While most market participants expected a non-eventful speech from Bernanke, traders used its as an excuse to sell.
Although Bernanke didn't discuss specifics of additional monetary easing, there is a growing belief that Bernanke and other Fed members will push for "Operation Twist" at the September 20 and 21 FOMC meeting. Under this potential plan the Fed's balance sheet composition would shift to longer-dated maturities. This would be done by selling short-term securities and buying longer-term securities and would have the desired result of lowering longer-term interest rates. This option would also not come with much political tension, as it would not require additional "money printing."
Going into the close, the Dow is down 86 points, the Nasdaq is down 16 and the S&P 500 is down 11.
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