Bernanke Says Level of Uncertainty is Higher than When he Led the Fed

Ben Bernanke thinks his former colleagues at the Federal Reserve will be reluctant to raise interest rates anytime soon.

One of Wall Street’s favorite pastimes is trying to discern hidden meaning in language tweaks from Fed officials. But Bernanke, the central bank’s former chairman, thinks doing so under current conditions will only lead investors astray.

In part, that’s because most Fed officials have been wrong on their economic forecasts over the past several years. They anticipated that economic growth would be stronger, while both the unemployment rate and the natural level of interest rates would be higher.

Chastened over their forecasting errors, Fed officials will be less likely to tip their hands on how they see the future, both in terms of growth and whether they will hike rates.

“It has not been lost on Fed policymakers that the world looks significantly different in some ways than they thought just a few years ago, and that the degree of uncertainty about how the economy and policy will evolve may now be unusually high,” Bernanke wrote this week in his most recent blog post for the Brookings Institution, a think tank he joined after leaving the Fed in 2014.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza