Major reaction by the markets following the FOMC announcement and Bernanke's comments was a major bid that pushed the market to new highs.
The most significant thing to come out of Bernanke's statements was that the Fed would continue easy monetary policy. That is positive for US equities as interest rates will remain low and the the stock market is certainly a better alternative to grow your money than any interest bearing account.
NOTABLE COMMENTS:
On GDP Projections being lower:
Fed expects weaker number as well, maybe under 2%. But this should only be a transitory phenomenon.
On when Fed will consider Tightening Monetary Policy:
Fed watching to be sure recovery is sustainable. Wants to see continued growth and job creation. At the same time Fed is monitoring inflation. Believes rises in energy and commodity prices are only transitory.
Until these conditions are violated, Fed will continue with easy monetary policy.
On weakening US Dollar:
Dollar fluctuation is normal. The weakened US dollar is the result of an unwinding of the safe haven carry trade that pushed the dollar higher following the financial crisis in 2008.
Strong and stable dollar is in the best interests of Americans and global economy. US monetary policy is aimed at maintaining low inflation, trying to acheive max employment and a stronger US economy. This will generate fundamentals that will help the dollar.
On gas and food prices rising and what can Fed do about this?
Gas and energy price increases due to supply and demand due to emerging markets growth as well as to disruptions in supply as a result of unrest in the MENA region. Not much Fed can do about gas prices w/out derailing growth. View is that commodity prices will not continue up.
On QE2 being unsuccessful:
It was never intended to be a panacea. It takes time, but program has been successful based on gains in the stock market and reduced spreads in the credit markets. Easing financial conditions should lead to better econ conditions based on decades of experience
Easing should remain constant after June
On US Debt and S&P downgrade:
This is nothing new, it is well understood that the United States debt levels are a concern.
It only reinforces that we need to address it. This is constructive.
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