Interest Rate Roundup

Monday, October 19, 2009

Bernanke speaks, ignores dollar and signals no policy shift

Okay, so that's not the headline you're going to read on the wires. But really, his speech at the Conference on Asia and the Global Financial Crisis in Santa Barbara, California is very academic. It's focused on longer-term trade and growth issues, and frankly, I don't see any explicit or implicit comments directed at the markets besides the following summary paragraph. And even that paragraph basically just restates the "on the one hand, on the other hand" view about stimulus -- without giving any indication as to whether Bernanke is migrating toward one camp or the other:

"Despite the initial successes of Asian economic policies, risks remain. As in the advanced economies, unwinding the stimulative policies introduced during the crisis will require careful judgment. Policymakers will have to balance the risks of withdrawing policy support too early, which might cut short a nascent recovery, against the risks of leaving expansionary policies in place for too long, which could overheat the economy or worsen longer-term fiscal imbalances. In Asia, as in the rest of the world, the provision of adequate short-term stimulus must not be allowed to detract from longer-term goals, such as the amelioration of excessive global imbalances or ongoing structural reforms to increase productivity and support balanced and sustainable growth."

Bottom line: I doubt these comments will do much for the beleaguered dollar, which was weakening into the release of Bernanke's remarks at 11 a.m. Indeed, I believe Bernanke's silence on the greenback speaks volume about how much he cares (read: not at all, as I spelled out last week).


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