Schumer And Bernanke “Get To Work” Q&A At July 2012 Testimony Important As Fed QE3 Signal Clearer:
Stocks Rebound As Investors Realize “The Fed Is The Only Game In Town”.
New York Democrat Charles Schumer’s questions to Fed Chairman Ben Bernanke were the most interesting today as the head of the U.S. Central Bank spoke to lawmakers in D.C. Schumer noted the unemployment rate, consumer price inflation and the minutes of the last FOMC meeting. It’s becoming clear that the Fed may need to move on qualitative easing before the November 2012 elections. QE3 is probably more likely than it was just a couple of months ago. Senator Chuck Schumer also mentioned the dual mandate for the Fed and Ben Bernanke responded positively.
Ben Bernanke stated:
We take the dual mandate very seriously and we will act in an apolitical, nonpartisan matter to do what’s best for the economy, we have said we are prepared to take more action…. it’s important we see sustained progress in the labor market and avoid deflation risk…
Schumer asked – “you still have some other tools?” Bernanke responded “I believe we do. Yes”
Schumer later encouraged Chairman Bernanke to “get to work”.
We believe the Fed already has plans for additional QE3 or increased liquidity drawn up. Implementation timing is key but we strongly believe the strategy has already been hashed. The Fed Reserve Bank is ‘prepared’ and the ‘work has been done already’.
Stocks fell sharply after the “he didn’t mention QE3 crowd” chimed in once again similar to after the June 2012 FOMC meeting minutes were released, but later in the day U.S. equities rebounded sharply as it became more obvious additional monetary policy from the Fed is likely.
We are back to watching the financials again as a market leader and the response to earnings this week has been positive even with the LIBOR scandal looming. The end of the week will be critical and the next important economic data point we will be monitoring is jobless claims data on Thursday to see if there is follow-through from the 26,000 drop for the week of July 7, 2002.