Federal Reserve Chairman Ben Bernanke traveled to Capitol Hill Thursday morning for another appearance before the Joint Economic Committee of Congress. While his comments were carefully crafted so as not to rattle the markets, PIMCO CEO Mohamed El-Erian took to the Huffington Post to deconstruct the true meaning behind the politico speak.
“[Bernanke] delivered a careful and balanced view of the economy (a gradual healing in the context of a still-muted outlook growth and jobs), re-iterated the improved banking and financial conditions at home (stressing the major additions to bank capital), and referred to the strains in Europe (acknowledging that they act as a drag on the US economy),” El-Erian wrote.
The most interesting aspect, El-Erian noted, related to policy, specifically:
1. “Certainly in his written submission, but also in the oral responses to questions, Bernanke is trying hard to shift the focus from monetary policy to other areas (particularly fiscal),” according to El-Erian. “This speaks to his lack of specificity on future monetary policy actions and to his comment that he would feel much more comfortable if Congress were to take some of the policy burden off the Fed.”
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2. If this interpretation is correct, Bernanke is following the example of Mario Draghi, the president of the European Central Bank (ECB). “Draghi has been unusually vocal in recent weeks about the need for politicians in Europe to step up to the plate and deliver on their policy responsibilities; and he has been clear about the risk that relying just on the ECB may, in my words, again end up providing a bridge to nowhere.”