July 17 2013

Federal Reserve chair says bond-buying could slow. No firm plan for policy adjustment, however. Jobs market ‘far from satisfactory,’ Bernanke testifies. The Fed anticipates curtailing its assets purchasing program by the end of the year contingent on an improving economic picture…

 


Powered by Guardian.co.ukThis article titled “Ben Bernanke: ‘We’re very focused on Main Street’ – as it happened” was written by Tom McCarthy, for theguardian.com on Wednesday 17th July 2013 15.44 UTC

1.31pm ET

Summary

We're going to wrap up our live blog coverage of Fed chair Ben Bernanke's House testimony. Here's a summary of where things stand:

Bernanke said the economy hasn't recovered enough for the Fed to take its foot off the gas – yet. "We need accommodative monetary policy for the foreseeable future," he said. 

The Fed anticipates curtailing its assets purchasing program, known as quantitative easing, by the end of the year, but that's contingent on an improving economic picture, which Bernanke emphasized isn't a given. Stocks were up and bonds were down slightly on the perceived signal that asset purchases could taper.

• Bernanke said the economy's still too weak to recommend raising interest rates. He reiterated two key benchmarks for moving rates: unemployment below 7% or inflation of 2%. We're not there yet.

Committee members thanked Bernanke for his service on the occasion of what may be his last appearance before the House as Fed chair. But it wasn't his last Hill appearance: he testifies before the Senate tomorrow. 

1.15pm ET

After 3+ hours of testimony before the House today, guess what Ben Bernanke gets to do tomorrow? Testify before the Senate. 10.30 am ET – be there.

1.13pm ET

And they're done. Adjourned.

1.12pm ET

Michele Bachmann, Republican of Minnesota, is up. She has a debt ceiling question. She says that for 56 days, federal debt on the books mysteriously stayed just under the debt ceiling.

"Has the federal government been cooking the books on this?" Bachmann asks.

Could be a good question – for the Treasury.

"This is not the federal reserve," Bernanke says. "You'd have to ask the secretary of the treasury."

Bachmann's follow-up: Have we exceeded our debt limit?

"Uh, I don't think so," Bernanke says.

1.04pm ET

Andy Barr, Republican of Kentucky, asks Bernanke about sustained unemployment: is it the Fed's fault or Obama's fault?

The economy has weak spots, but "it is the case that we have made some progress since 2009… we're doing better than a lot of other industrial countries," Bernanke replies.

Barr says there's "gotta be a fiscal policy problem here," because the Fed's expansionary policy has been responsible. But Barr isn't another self-hating Congressman. The implication is that it's Obama's fault.

12.59pm ET

University of Michigan professor Justin Wolfers notes that bond prices are down slightly... after months of steep climbing.

12.49pm ET

Guardian emergency responder Alan Yuhas clarifies the IRS Star Trek video reference. Alan wrote about it back in March:

The IRS has apologized for spending tens of thousands of taxpayer dollars to film a Star Trek parody, but has defended the value of Gilligan's Island parody made at the same time. The agency estimates that total expenditures were about ,000.

The Star Trek video features a spaceship on a "never-ending mission to seek out new tax reforms, to explore strange new regulations, to boldly go where no government employee has gone before". They set off to the planet Notax, whose fiscally irresponsible aliens live in chaos. The six-minute video has special effects, elaborate costumes, and two crewmen banter: "Back in Russia, I dreamed someday I'd be rich and famous." "Me too. That's why I became a public servant." The ship's captain throws up his hands in dismay as the crewmen bump fists.

Read the full fun piece here.

12.45pm ET

Congress.

"I feel like Bette Midler,' says Denny Heck, Democrat of Washington – "the very last guest on the very last episode of the Tonight Show. She famously quipped to Johny Carson, 'You are the wind beneath my wings.'"

Heck says Bernanke's like that, with the economy. 

Updated at 12.50pm ET

12.42pm ET

Dennis A. Ross, Republican of Florida, has said something about an "IRS Star Trek video." He does not elaborate. We'll wait for him to circle back around on that. He's calling for a healthy debate on the debt ceiling – he thinks that the brinksmanship that led to the downgrading of US debt was a good thing. Unclear whether there's a question coming here.

Bernanke says the debt ceiling fights are bad. 

"We did get a pretty big shock to consumer sentiment and it did do harm to the economy."

Updated at 1.19pm ET

12.36pm ET

Bernanke, still going strong, ish, 150 minutes in. Currently talking: Joyce Beatty, Democrat of Ohio, the second-least-senior member of the committee.

12.32pm ET

Randy Hultgren, Republican of Illinois, returns to a concern of many lawmakers on the GOP side, that the Fed is over-regulating community banks, which Hultgren says are being hurt by an interest-rate crunch.

Bernanke says the low rates are meant to strengthen the economy. Throughout the hearing he's deflected the assertion that local banking is crippled. "We're very focused on Main Street," he said early on.

Updated at 12.33pm ET

12.18pm ET

We're not going anywhere! This is the part where Bernanke drops the surprise that turns the economy on a dime. Any second now. 

Updated at 12.20pm ET

12.13pm ET

Marlin A. Stutzman, Republican of Indiana, asks whether Obamacare is hurting the economy. Bernanke admits there have been signs that employers are having some difficulty navigating the new rules requiring them to provide insurance if they carry a certain number of full-time employees:

"It's very hard to make any judgment. One thing that we hear… is that some employers are hiring part-time in order to avoid the mandate there. So we have heard that. But … the high level of part-time employment has been around since the beginning of the recovery, and we don't fully understand that.

Stutzman asks whether it might be smart to push back Obamacare compliance deadlines. Bernanke replies:

This is beyond my pay grade. This would depend on how well, and how much time is needed, to fully implement the bill.

12.04pm ET

Guardian finance and economics editor Heidi Moore flags an exchange between Bernanke and Republican Stephen Lee Fincher of Tennessee, who is worried about private sector dependence on federal largesse – except when he's not worried about that.

Updated at 12.05pm ET

11.44am ET

Emanuel Cleaver, Democrat of Missouri, has a koan-like question for the Fed chair:

What would be the consequences of easing quantitative easing prematurely? 

Bernanke replies with half of this and half of that. The Fed plans to decrease asset purchases unless that's not called for in which case they'll be continued.

11.38am ET

Guardian finance and economics editor Heidi Moore agrees with the congressman's assessment that the legislature hasn't done diddly to bring the jobs market back. In April she wrote, under the headline "When will this do-nothing Congress wake up to America's job crisis?":

While the unemployment rate is dropping, and the number of jobs goes up and down, the labor force participation rate has been steadily falling since the economy started weakening in 2007. [...]

This situation is, economically, a catastrophe. It has existed for the past five years, and no lawmaker in Washington has done very much about it. Somehow, a small group of Republican lawmakers have hijacked the national conversation about financial matters to blather about deficits and long-term budgets. (Leave aside the fact that not a single lawmaker, of either party, seems capable of putting together any kind of practical budget at all.)

Most Democrats and the White House have gone along with this empty rhetoric, accepting that the current standard of wise budgeting is "discipline" and "long-term goals". It's not. The current standard for the creation of a reasonable budget should be "do something that encourages job creation". This task has gone too long unaddressed.

Read the full piece here.

11.35am ET

Congress has to do more to instill confidence in consumers that "we will do things to help create jobs," Al Green, Democrat of Texas, says. "We have not done enough… your good work still needs some help from the policy makers.

"Consumers say to me, 'I need confidence.'" Really?

Bernanke is diplomatic. "No one has a magic formula" for creating consumer confidence, he says. 

11.28am ET

Stephen F. Lynch, Democrat of Massachusetts, is up. He notes that Bernanke is a scholar of the Depression era and wonders whether 30-year mortgages were available back then. They weren't; Lynch's point is to underscore the importance of government support for the housing market.

We want to keep "a preservable, 30-year fixed mortgage, keep that market going, without having the taxpayer take all the risk up front," Lynch says.

Bernanke says the government can't unilaterally move prices but it can step in when the market won't self-correct. "The argument for thinking about government participation is exactly like the situation we faced in the last few years, where there's a big housing problem" and private lenders aren't willing to act counter-cyclically, Bernanke says. 

Lynch thanks the Fed chair for his service. "I've heard stories that this might be your last appearance before this committee for this purpose," he says.

11.19am ET

Bernanke's lips are talking tapering, but that may not be the take-home message here:

Updated at 11.19am ET

11.16am ET

Suggested reading via the National Journal:

11.13am ET

Carolyn B. Maloney, Democrat of New York, is up. She defers to Ed Perlmutter, Democrat of Colorado, because he didn't get to ask a question last time Bernanke appeared.

Perlmutter thanks Bernanke for his steady hand on the economic rudder. Then he goes back to … the sequester. How do we better understand what this 1.5% in lost growth means, practically speaking, he asks.

Bernanke says losses could be thought of in terms of 760,000 "full-time equivalent jobs" or unemployment down "another seven or eight tenths, something like that."

"So it makes a very big difference," Bernanke says. "It's very substantial." 

11.08am ET

Dominic Rushe is keeping an attentive eye on the tickers. Stock markets are still rising as Bernanke speaks, he notes – the Dow is now up +24.13 points or 0.16%.

Hold onto your seats.

11.03am ET

Guardian US business correspondent Dominic Rushe captures the Fed chair in a pensive moment:

11.02am ET

Democrat William Lacy Clay of Missouri is up with a question about how the sequester may be hurting the jobs market.

"In this recovery, even as the private sector has been creating jobs, government at all levels has been cutting … 600,000 jobs," Bernanke says. He says that's unusual during an attempted recovery. 

He refers back to the CBO estimate that the sequester is dulling growth by 1.5% a year. Whose idea was the sequester again? Did we decide whom to blame? The Democrats keep bringing it up, apparently confident the public believes it's the fault of John Boehner's Congress. Insofar as the public is thinking about it.

Updated at 11.04am ET

10.58am ET

Isn't it true, Huizenga asks Bernanke, that Wall Street has benefited more from loose money and bond-buying than Main Street has? 

"I don't think so," the Fed chair replies. "We're working through the mechanisms we have, which of course are financial interest rates and financial asset prices."

"We're very focused on Main Street," Bernanke says.

Updated at 10.58am ET

10.55am ET

Bill Huizenga, Republican of Michigan, asks Bernanke if his buddy should refinance his house – is now a good time?

"I'm not qualified to respond as a financial adviser," Bernanke jokes. Ha.

10.52am ET

We have a self-hating Congress.

10.50am ET

Ranking Democrat Maxine Waters of California is up. She asks Bernanke about an IMF recommendation to repeal the sequester and raise the debt ceiling. The president would like that. Does Bernanke agree?

Bernanke says the sequester is hurting growth, to the tune of about 1.5% in 2013.

"As I've said many times, I think that fiscal policy is focusing too much on the short run and not enough on the long run," he says. 

10.46am ET

Bernanke answers a question from committee chair Jeb Hensarling, Republican of Texas.

Bernanke defends the Fed's decision to telegraph its intentions of keeping rates low, pegged to the unemployment and inflation benchmarks. He says markets are figuring out the Fed's intentions and relative stability is the result.

Updated at 10.46am ET

10.41am ET

If Bernanke testifies and no one hears him, did he make a sound?

10.40am ET

Bernanke testifies that the economy is recovering "at a moderate pace" but he doesn't sound inspired. Home sales and construction are up. Unemployment is down slightly – it hit 7.6% in June – but "the jobs situation is far from satisfactory." Inflation has not touched the 2% benchmark.

The Fed may begin to ease its bonds purchases "later this year," Bernanke says. But it's conditional on sinking unemployment or new indicators of inflationary pressure:

Committee participants also saw inflation moving back toward our 2 percent objective over time. If the incoming data were to be broadly consistent with these projections, we anticipated that it would be appropriate to begin to moderate the monthly pace of purchases later this year. And if the subsequent data continued to confirm this pattern of ongoing economic improvement and normalizing inflation, we expected to continue to reduce the pace of purchases in measured steps through the first half of next year, ending them around midyear. At that point, if the economy had evolved along the lines we anticipated, the recovery would have gained further momentum, unemployment would be in the vicinity of 7 percent, and inflation would be moving toward our 2 percent objective. Such outcomes would be fully consistent with the goals of the asset purchase program that we established in September.

10.31am ET

It works! They fixed it. Bernanke begins. Once more his remarks are here. CSPAN has yet to fix its online feed. The Wall Street Journal has a feed that's working fine.

10.29am ET

Now the committee members and the witness are just sitting uncomfortably staring at each other as presumably terrified techs try to sort out what's wrong.

Bernanke has his arms folded at the witness table and appears not the least put out at the unexpected twist. It's exactly the kind of composure the markets look for in a Fed chair. 

10.26am ET

Heidi Moore is the Guardian's finance and economics editor.

10.23am ET

Committee members are making opening statements, but they're hard to hear because either the mics or the speakers – it seems like a speaker issue – aren't working. CSPAN is not running its usual online video stream on account of the technical issue. 

The statements from committee members are barely audible on television with the volume turned up to around 40. What words can be made out sound safely dull.

It's like Bernanke mumblecore. 

10.15am ET

The Guardian's Dominic Rushe is watching the markets as we prepare to watch Bernanke. So far so good, he reports:

All the major US markets are up – a bit – ahead of Bernanke's testimony. The Dow is up 21 points, 0.14%. This despite the fact that the sequester has obviously taken a huge bite out of Congress's broadcast budget.

10.12am ET

Bernanke's testimony is delayed due to an audio problem in the hearing room. 

SELL! Sell!

While we wait you can read Bernanke's prepared remarks here

9.13am ET

Good morning and welcome to our live blog coverage of Federal Reserve chairman Ben Bernanke's testimony before the House Financial Services Committee. Bernanke's testimony has been released in advance of his 10am ET start in an effort to forestall any undue market excitement.

According to his prepared remarks, Bernanke will announce a possible winding down of the central bank's program to add fuel to a sputtering economy by buying bn in bonds each month, cyclical purchases known as quantitative easing. "Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," Bernanke will testify, according to Reuters:

Bernanke set off a brief but fierce global market sell-off last month when he outlined plans to reduce the quantitative easing program, and he has joined a slew of Fed officials since then who have spelled out their intention to keep interest rates near zero well after the asset purchases.

Bernanke will take questions from committee members on the health of the economy, expectations for unemployment, inflation and other indicators in his semi-annual trip to the Hill – potentially his final appearance as Fed chair. Watch it with us here. 

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USA 

The two doves on the Bank of England’s Monetary Policy Committee, Paul Fisher and David Miles, switched their position to back new governor Mark Carney in a 9-0 vote to keep the size of the quantitative easing program unchanged at 375 billion pounds…

 


Powered by Guardian.co.ukThis article titled “Bank of England policymakers voted 9-0 to leave QE unchanged” was written by Heather Stewart, for theguardian.com on Wednesday 17th July 2013 09.19 UTC

Bank of England policymakers swung behind the new governor, Mark Carney, and voted unanimously against extending quantitative easing at this month's monetary policy committee meeting.

David Miles and Paul Fisher, the two MPC members who had repeatedly backed Sir Mervyn King's calls for an extension of the deflation-busting policy, decided instead to switch their votes and support Carney's plan of leaving QE unchanged, amid signs that economic recovery was becoming "more firmly established".

However, the minutes also showed that the MPC plans to use an August deadline to examine its policymaking remit, set by the chancellor, to establish "the quantum of additional stimulus required and the form it should take". That suggests Miles and Fisher may simply have decided to await next month's meeting before pushing for a fresh round of QE.

George Osborne has asked the Bank to announce next month whether it would like to adopt the policy of "forward guidance" – announcing how it expects interest rates to move to influence market expectations.

The MPC made a first foray into forward guidance at its meeting a fortnight ago, taking the unusual step of issuing a statement to financial markets warning them that interest rates were unlikely to rise.

When Carney was governor of the Canadian central bank, he pledged to keep interest rates low for 12 months, helping to calm fears in financial markets that borrowing costs were about to rise. However, some MPC members are known to be unenthusiastic about the idea.

July's meeting took place during the so-called "taper tantrum", when the Federal Reserve chairman Ben Bernanke's plan to phase out its programme of QE prompted share prices to plunge and bond yields to spike, pushing up interest rates across many economies.

The minutes show that MPC members were concerned by the "surprising" rise in UK government bond yields that followed Bernanke's remarks, and were keen to dampen expectations that interest rates were set to rise. In April, markets had not been expecting rates to go up until late 2016; by the time the MPC met, that had been brought forward to mid-2015.

"UK developments, while broadly positive, had not been enough to warrant such an upward move in the near-term path of Bank Rate," the minutes said.

Persistently weak real income growth – with high inflation more than outweighing paltry pay deals – was also highlighted as a risk to the recovery by MPC members: "Real income growth had remained weak … and it was unlikely that consumption growth could continue at its current rate without some rise in real incomes."

However, the MPC added that "developments in the domestic economy had generally been positive" and broadly in line with the moderately upbeat picture presented by the previous governor, Sir Mervyn King, at his final inflation report press briefing.

For "most members", therefore, "the onus on policy at this juncture was to reinforce the recovery by ensuring that stimulus was not withdrawn prematurely" – subject to keeping inflation on track to hit the government's 2% target.

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