Not since Brian of Nazareth has there been a more reluctant messiah.
But the more Fed Chairman Ben Bernanke tries to avoid the spotlight, the more his legions of disciples hang off his every word.
After his utterances sent shockwaves through global markets almost a month ago, last night’s Pronouncement From The Hill, was intended to provide some comfort for screen jockeys, to clarify his intentions. Alas, it was not to be.
Despite his oblique and highly qualified projections that “if” things continue to improve as the Fed “expects”, a reduction in its $US85 billion bond purchases “may” continue late this year and perhaps even end by mid next year.
If it doesn’t, then the Fed will keep its foot on the gas pedal. And as he reiterated in down home terms, easing up on the gas is a far cry from slamming on the brakes.
The message may have been almost identical to that of the previous month.
But what he managed to achieve last night was to heighten speculation about the great taper caper. Wall Street dived, shedding 206 points. US interest rates jumped. The greenback strengthened. The Aussie plunged to three year lows.
Given the Fed has press conferences scheduled for September and December, the speculation now is that tapering on bond purchases will begin in either of those two months.
Bernanke’s great monetary experiment, the long term consequences of which are anyone’s guess, had to end some time. It was always just a question of when.
But there is far less certainty in the “when” than markets now are pricing in.
Despite pouring $US85 billion a month into the economy, American GDP is struggling to hit 2%. Inflation is barely positive. Unemployment, at 7.6%, has edged higher in recent months and is at levels that in previous eras would have alarmed Washington. The housing recovery is led largely by institutional buying.
In short, the American economy remains weak and vulnerable.
Bernanke has set a target on unemployment of 6.5% before his bond purchases end. Even then, he stressed that level is a threshold, not a trigger. So the taper trigger could be extended well beyond the end of this year.
Even when bond purchases finally are canned, easy monetary policy and interest rates near zero will be maintained for quite some time, probably until well into 2015.
It would appear the market reaction last night and today would be an overreaction. At some stage, everyone will twig that Ben is not the messiah, and perhaps not even a naughty boy.