Federal Reserve Chairman Ben Bernanke is expected to maintain his dovish tone when he speaks to Congress Wednesday, and he is likely to dispel any notion that the Fed is ready to cut back on its easing policy.
The markets have been speculating the Fed could start to gradually cut back on its $85 billion monthly bond buying program, and that view has been furthered by some hawkish Fed officials who would like to see quantitative easing wind down sooner, rather than later.
Bernanke appears before the Joint Economic Committee at 10 a.m. EDT, and at 2 p.m., the minutes of the last Fed meeting will be released.
“The doves are taking back the reins. The hawks had their day in the sun,” said George Goncalves, Treasury strategist at Nomura Americas.
“I think the bond market is going to be happy because Bernanke’s going to reiterate his dovishness, and he’s still cautious, but he’s constructive on the economy,” said Goncalves. “I think all markets are going to be pleasantly surprised tomorrow. I think the minutes might introduce some volatility because there’s definitely tension at the Fed about when to stop and when to do more.”
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