Federal Reserve Chairman Ben S. Bernanke reiterated two key themes in his written Monetary Policy Report testimony before Congress yesterday: the Fed expects a gradual recovery to continue, and it believes the current policy stance is appropriate to support a recovery.
Bernanke signaled he needs to see signs of deeper weakness in the economy before pushing the bounds of monetary policy further. The Fed’s near-zero interest rates and record balance sheet are already “very stimulative,” Bernanke said yesterday in Senate testimony.
It will be interesting to see how Bernanke reacts to the question and answers session that will be held later today. (13:30 GMT) More importantly, we need to know how the markets will be influenced in Europe and the US. The euro fell sharply against the U.S. dollar while the yen rallied after Bernanke’s remarks.