Federal Reserve Chairman Ben S. Bernanke — returning this week to the scene of a 2010 speech that foreshadowed a second round of a monetary policy called “quantitative easing” — probably will disappoint investors looking for him to signal a new stimulus effort.
Bernanke probably won’t use his speech Friday at the Fed’s annual symposium in Jackson Hole, Wyo., to suggest a third round of bond buying is at hand, according to such economists as Michael Feroli and James O’Sullivan.
Members of the Federal Open Market Committee, who meet on Sept. 12-13, are closely monitoring unemployment and other data and have been divided about whether to spur expansion. The U.S. economy also remains beholden to political decisions made in Washington and in Europe, which is struggling to contain its debt crisis.
“I don’t think Bernanke wants to make Jackson Hole into a policy-signaling event,” preferring to “reserve that for the [Federal Open Market Committee] meetings,” said Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.
Two years ago, Bernanke said in his speech that the committee was “prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”
The committee didn’t announce a second round at its September meeting, though; it waited instead until Nov. 3 that year.
“The Fed chairman’s Jackson Hole address has traditionally been used more for laying out broad themes than for sending specific policy signals,” O’Sullivan, chief U.S. economist for High Frequency Economics, said in a report on Monday.
Markets rallied in the weeks after Bernanke’s 2010 remarks; “on the day, however, the speech was generally read as inconclusive,” O’Sullivan said. “Nor do we expect Mr. Bernanke to send a definitive signal this year.”
Speculation that the Fed will do more to bolster growth has helped drive up stocks and commodities, with the Standard & Poor’s 500 Index rallying 10 percent since June 1, and gold rising to $1,670.60 an ounce on Aug. 23, the highest since April. Crude oil climbed to $97.26 a barrel on Aug. 22, the most in four months.
“You can’t find a trader who doesn’t think Ben Bernanke is going to signal QE3 [a third round of quantitative easing] at Jackson Hole,” said Dan Greenhaus, chief global strategist for broker dealer BTIG LLC in New York. “But to have traders so convinced that this is a sure thing kind of screams there’s room for a letdown here.”
Policymakers at the central bank have said they are prepared to provide new stimulus “fairly soon.”