Fed chief Ben Bernanke successfully navigated through his first post-meeting press conference on Wednesday, avoiding rocking the boat with gaffes while closely toeing the company line on monetary policy and the economy.
The reaction to the historic media event was mixed: stocks climbed to fresh multi-year highs, the dollar extended its losses against the euro and market watchers, depending upon who you asked, both applauded the tough questions from reporters and criticized them for not pushing him harder.
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But by any standard, Bernanke was successful in making sure he didn’t create any headlines he didn’t want to with a slip of the tongue.
“I thought he did a great job of deflecting and saying absolutely nothing,” said Joe Saluzzi, co-head of trading at Themis Trading. “He stuck to the script.”
While Bernanke kept to his common refrain that inflation is under control and job creation remains subpar, the venue for his comments was starkly different. Instead of speaking to a group of wonky economists or angry politicians, he spoke to a room full of reporters eager to stand toe-to-toe with the Fed chief for the first time ever.
During the course of the hour-long event, Bernanke took 18 unscreened questions, plus several follow-ups, and largely avoided giving filibuster-style answers aimed at killing the clock.
“I torture myself by watching the semiannual testimony in front of Congress,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald, alluding to the painful-to-watch Q&A sessions Bernanke is required to give. “I thought this was so different in that the press asked great questions -- very pointed questions.”
Others, like Saluzzi, believe reporters failed to sufficiently interrogate the Fed chief on matters like devaluing the dollar and the transfer of wealth.
“As expected, Bernanke was pitched a host of predictable questions,” Dan Greenhaus, chief economic strategist at Miller Tabak, wrote in a note. “Therefore it should shock few that the answers were predictable as well.”
Bernanke, a former professor at Princeton University, did seem to be very well prepared for the questions coming his way, but he appeared to answer them in a more straightforward fashion than one might read in an FOMC statement.
For example, asked about the boilerplate “extended period” language that the FOMC uses to say how long interest rates will stay extremely low, Bernanke said the Fed would signal an interest rate change at least “a couple of meetings before action” is needed.
“The reason we use this vague terminology is because we don’t know how quick of a response will be required,” Bernanke said.
Likewise, Bernanke went further than in the past to shoot down speculation the Fed will have to institute a third round of quantitative easing -- QE3 -- to boost the economy. He reiterated (as the FOMC did) that QE2 will end in June and said round three would be too risky.
“I’ve never seen him answer questions like that,” said Pado.
Bernanke also used the Q&A to make his case that the Fed is on top of the inflation situation. He repeatedly stressed the central bank’s dual mandate of both price stability and full employment and made an effort to note in more colorful terms the pain consumers are feeling from high gas prices.
"High gasoline prices are absolutely creating a great financial hardship for a lot of people," he said in response to a question from The Wall Street Journal. “It’s obviously a very bad development to see gas prices rise that much.”
Wall Street appeared to breathe a collective sigh of relief after the press conference ended, with the bulls bidding the blue chips as much as 70 points about the level they were at when Bernanke took the stage.
“It was what they wanted: nothing. The market is rallying because he didn’t blow himself up,” said Saluzzi.
By the closing bell, the Dow ended the day at fresh 2011 highs and the Nasdaq Composite closed at its best level since December 2000.
“That has taken away a little bit of uncertainty and people to feel more comfortable about buying the highs,” said Nick Kalivas, vice president of financial research at MF Global.