Waiting for the Chairman to Speak

Ben Bernanke, the Chairman of the Federal Reserve, will present his twice-yearly testimony to Congress tomorrow (the Senate) and then again on Thursday (the House), accompanied by the always must-read semi-annul monetary policy report by the Fed Board. The big questions this time (and somehow there are always big questions when the Chairman speaks to Congress) are:

1. Whether we should be concerned about an economic slowdown and inflation coming in below the Fed’s lower target;
2. Whether in present circumstances, the Fed’s present monetary policy stance and plans for an exit strategy from its extraordinary stimulus measures are still appropriate.

We’ll also watch for any statements by the Chairman on our fiscal challenges. Chairman Bernanke and other Fed officials have placed considerable emphasis on getting our fiscal house in order sooner rather than later, to take heat off the Fed. It is still early days, but concern has already started to surface that politicians, who might ultimately be unable to take the tough decisions needed to get our fiscal house in order, might then turn to the Fed to get them off the hook by monetizing our huge debt. We could pay a dear price through inflation.

Stay tuned to this space tomorrow.