Bernanke tightens hold on Fed message

By Steve Matthews and Aki Ito
Bloomberg News

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Ben Bernanke is tightening his control of Federal Reserve communications to ensure investors hear his pro-stimulus message over the cacophony of more hawkish views from regional bank presidents.

The Fed chairman, starting today, will cut the time between the release of post-meeting statements by the Federal Open Market Committee and his news briefings, giving investors less opportunity to misinterpret the Fed’s intent. In recent presentations, he has pledged to sustain policies known as “easing,” defending $85 billion in monthly bond purchases during congressional testimony last month and warning that “premature removal of accommodation” may weaken the expansion.

“Bernanke rightly views it as imperative to get out in front of any movement to quickly pull away from stimulus, and to signal that to markets,” said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore who worked at the Fed’s division of monetary affairs from 2004 until 2008. Bernanke “felt he needed to take the wheel” of communications to dispel any perception that the Fed will end bond purchases too soon.

Bernanke’s push to continue record stimulus faltered with the Jan. 3 release of minutes from the market committee’s December meeting, which said several officials favored slowing or stopping bond buying well before the end of 2013.

In his congressional testimony Feb. 26 and 27 and a March 1 speech at the Federal Reserve Bank of San Francisco, Bernanke promoted the Fed’s bond purchases, saying stimulus shouldn’t be slowed by financial-stability concerns.

The chairman wants to avert an unintended rise in Treasury yields that would undermine his unprecedented efforts to reduce long-term interest rates and speed growth, including the rebound in vehicle sales and housing, said Nathan Sheets, the Fed’s top international economist from 2007 until 2011.

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