Bernanke is unlikely to say anything important on April 27th

Ben Bernanke will soon become the first Fed Chairman to hold a press conference about what the f about what the Federal Board group on monetary policy’s deliberations have been. His first one will be in just six days time (April 27th) and already the US media set is in a paroxysm of panic about what Ben the untutored intellectual might say.

‘This change in the Fed’s communication with the markets alone is enough to give investors the jitters’ said CNBC news, ‘and the nervousness is compounded by the anticipation of a signal by the Fed chief as to whether the quantitative easing that has fueled this bull market will continue past its stated end date in June.’

Reuters too displayed little faith in the Fed Chairman’s media skills: ‘Bernanke the academic will have to toughen up when he faces the Q&A sessions. Journalists will be hungry to break a story and trick him into saying too much.’

Myself, I’m not so sure Bernanke is entirely virginal in such matters. There’s been a fair amount of Fed Board dissent of late: Tom Hoenig the Kansas Fed President, and rate-hawkish members like Philadelphia Fed President Plosser and Minneapolis President Narayana Kocherlakota, have let it be known they would like to see rates rise, and QE2 ended. Bernanke clearly doesn’t think this. As Steve Cortes, founder of research firm Veracruz LLC, observes, “I think Bernanke wants to continue to ‘QE3,’ but the rest of the Fed does not….if he has to admit that on the air, it could be the turn”.

Except that Ben Bernanke may well be smart enough to realise that he will be the only person from the Board at the press conference. As Joe Stalin remarked, “History is made by those who turn up”. The Slog’s hunch is that Bernanke will use the Royal plural personal pronoun to suggest more solidarity on the Fed Board than there perhaps is in reality.

However, my water also tells me that the media are getting in a tizz about April 27th, when I suspect the real crunch date will by June 22nd – trailed as the date of Ben’s second press conference. As The Slog predicted earlier in the week, the Fed Chairman has already accepted that he cannot carry on with the quantitative easing programme beyond mid-year. Rather than get involved in the sort of unseemly public argument that would terrify the markets, I think he will announce the end of asset purchases on June 22nd…having carefully leaked the content of his remarks a week or so beforehand.

Fed officials were divided over the timing of tightening, according to the minutes of the March 15th session. But most of the 50 analysts in a Bloomberg News survey last month said they expected the Fed to ‘keep its bond portfolio stable for some time after the $600 billion purchase program ends’. This is finance-bollocks for ‘QE2 will be tailed off gradually’. When the tailing off starts is another matter entirely.

As for interest rates beyond the end of quantitative easing, opinion leaders contacted by The Slog  foresaw a higher than 50:50 chance that rate rises in the US will be under way by January 2012. I remain fairly sure that ‘formal’ QE2 will officially close at he end of June 2011. But nobody should forget that during 2010, easing continued secretly despite the official ‘end’ of it in the Spring of that year.