Ben’s speech – no QE3 for now

As anticipated by many in the market, Bernanke didn’t hint or implied of any further quantitative easing plan.

Ben Bernanke, the chairman of the Federal Reserve, gave a speech today, August 26th named “The Near- and Longer-Term Prospects for the U.S. Economy”.

Following the recent FOMC meeting, in which it was decided to keep rates at their low level at least until mid-2013, today’s speech didn’t deliver any substantial promise or headline. The markets seem to have known this in the past few days as the major commodities prices have slowed their climb up and the Euro/USD is currently being traded down.

He addressed the economic slowdown in the US and pointed out that the Fed’s stimulus plans helped halt the fall of US economy:

Why has the recovery from the crisis been so slow and erratic? Historically, recessions have typically sowed the seeds of their own recoveries as reduced spending on investment, housing, and consumer durables generates pent-up demand. As the business cycle bottoms out and confidence returns, this pent-up demand, often augmented by the effects of stimulative monetary and fiscal policies, is met through increased production and hiring… These restorative forces are at work today… Unfortunately, the recession, besides being extraordinarily severe as well as global in scope… “

He also referred to the ongoing slow down in the housing market due, in part, to tight credit conditions; the housing market usually played an important role in US economic history in pulling out of recessions.

He also took a shot at the role of policymakers in Washington in leading the economic development of the U.S. in the years to come:

“Fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs. To the fullest extent possible, our nation’s tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure”.

 Finally, he didn’t completely close the door on additional steps that the Fed might do in the near future in order to jump start the economy; he might reveal them in following the FOMC meeting in September.

“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. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September… The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.”

Current Nymex crude oil price, short term futures (September 2011 delivery) is traded down at $84.08 per barrel as of 15:22*.

Current gold price, short term futures (September 2011 delivery) is traded at $1,785.1 per t oz. a $21.9 increase or 1.24%, as of 15:12*.

Euros to USD is currently traded down at 1.437 a 0.0596% decrease as of 15:22*.

(* GMT)


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2 comments for “Ben’s speech – no QE3 for now

  1. John
    August 26, 2011 at 6:41 pm

    So what are the ramifications for gold and silver next week and into September?

    • August 26, 2011 at 7:28 pm

      I think it should curb the rally of gold and silver prices. I will refer to it in more detail in my Sep monthly outlook and in the upcoming Monday gold and silver daily outlook .

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