Pictured, Federal Reserve Chairman Ben Bernanke stability financial monitoring (FSOC) Board meeting at the Department of the Treasury in Washington, November 23, 2010.
Credit: Reuters/Jason ReedBy Pedro Nicolaci da CostaWASHINGTON | 7 January 2011 12: 13 pm EST
WASHINGTON (Reuters) - Ben Bernanke not get an easy passage of legislators U.S. Friday that the President of the Federal Reserve offers its first congressional testimony since the Central Bank launched a controversial link purchasing policy.
Facing a power newly Republican skeptical about latest attempt the Fed to stimulate the US economy, Bernanke can put the brakes on some optimism of Wall Street, surrounding a recent rise in data economic key.
Having burned before by now a pick-up, even while the housing crisis intensifies, Bernanke is likely to ensure that the growth trend is firmly anchored before sounding chipper too.
Minutes of the December Fed policy meeting setting revealed great caution on recent improvements in economic data, including a high threshold limit plan to buy $ 600 billion more in bonds announced in November.
"Economic prospects were considered improvement, members generally felt that the change in the outlook was not sufficient to justify adjustments to the asset purchase programme", said the minutes published earlier this week.
Bernanke will probably stick to this script before the Senate Budget Committee although numbers indeed reported a pick-up in activity - and the glimmers of hope on the employment front.
He must explain why the yields on Treasury Benchmarking notes jumped by 1 percentage point since announcement of binding of Fed purchases moving in the opposite direction of what was planned.
The President may nod to a possible short-term economic boost from tax-free the President Barack Obama deal with Republicans. But it could also echo evaluation of employees of its package does not materially unravel longer term horizon.
"It's easy and quite reasonable for him to say that this is all very preliminary, and it will be some time before improvement trends are strongly held, said Lou Crandall, Chief Economist at Wrightson Associates in New York."
Indeed, U.S. unemployment remains near 10 percent and economic growth - powered 2.6% on an annualized basis at the latest blush - is too weak to stimulate significant hiring.
TO TAX CONTRECŒUR
Bernanke testimony scheduled for 9: 30 pm EST, will be one hour after the Ministry of labour has published its monthly report closely monitored employment.
It is intended to show that the economy generated 175 000 new jobs in December, marking the best monthly result since May. The unemployment rate should dip slightly to 9.7% to 9.8%.
In this context, is hardly a surprise if Bernanke proves less jubilant.
"We should probably get through two reports jobs more and will probably use the next semi-annual (testimony) in February to develop the next phase," said Troy Davig, Senior Economist at Barclays Capital in New York. "It would be surprising that he ventures too far or signals something beyond what has been established in minutes this week."
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