2013 Economic Calendar
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Chair Speech

Description
Federal Reserve Chairman Ben Bernanke (FOMC Voting Member) to testify before the Senate Banking Committee in Washington.

Highlights
Chairman Bernanke's prepared remarks are the same as presented to the House Financial Services Committee yesterday.

During Q&A, Bernanke noted that tightening too soon risks high unemployment and too late risks higher inflation.

He described future policy changes in three stages. The first stage in pending policy change is ending asset purchases which depends on substantial improvement in the labor market. The second stage would be when unemployment reaches 6.5 percent and inflation still is under 2.5 percent, then there will consideration of raising policy rates. The third stage will be normalization of policy rates.

Bernanke anticipates a long period of accommodation after asset purchases end. He does not see tight policy any time in the foreseeable future.

He noted that the Fed must key an eye on mortgage rates and affordability.

He repeated that QE will end by mid-2014 if the recovery tracks as anticipated.

Bernanke indicated that the Fed will not wind down its balance sheet until after beginning rate hikes. The Fed currently is not planning to sell any mortgage-backed securities at this point.

Regarding fiscal policy, Bernanke noted that monetary policy is not a panacea and that the Fed would welcome help from fiscal policy as the recovery is not as strong as preferred. He also stated that it is not the Fedís place to try to force Congress to take a given action but to implement monetary policy in line with what it is given in terms of fiscal policy.

On whether there will be tapering announced at the September FOMC, Bernanke said that it is too early to determine. He noted that economic data have been mixed since the last FOMC.

On fiscal policy, Bernanke stated that it would be more helpful to have a sound long-term fiscal policy than worrying about short-term issues.

On the issue of capital requirements for U.S. banks, the Fed chief noted that Basel III requirements are a floor and that requirements could be higher if appropriate. On too big to fail, he said that additional steps are appropriate if Dodd-Frank does not end TBTF.

As with House committee members yesterday, nearly every member of the Senate committee thanked Chairman Bernanke for his service to his country although some prefaced with having had differences. They generally stated that they did not know of Bernankeís plans after January 31 when his term as chairman ends but gave their appreciation and some noted how he prevented the financial crisis from being far worse. Bernanke gave no indication of his future plans but appeared to be very relaxed.


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