David Engstrom writes:
As Chairman Bernanke sang his Swan Song, the crescendo heard through multiple stanzas was that the Fed would maintain a highly accommodative policy. The longer we listened the more we heard the actions taken today to reduce Treasury Bond and Mortgage Backed Security purchases, each by $5 billion a month, were in fact the result of a switch in policy emphasis. The Chairman traded bond purchases for forward guidance promising an extended period of very low interest rates. The markets understood this and as the case has been in every other announcement of a stimulus program, the markets rallied.
Throughout his speech, Bernanke cited improved economic conditions, including a decline in unemployment. He even went as far as to say, that by the end of the year, unemployment would drop by an additional 1.3 million workers and bring the data closer to the targeted 6.5% unemployment rate. He glazed over some of the finer points of unemployment data by attributing the growing number of discouraged and under-employed workers to demographics. Tell that to the 1.3 million who are about to drop off the unemployment rolls.
The bottom line is this. Just because 1.3 million people will lose unemployment benefits by the end of the year, does not mean unemployment will drop. The data may indicate a drop but the joblessness still exists. And, just because you are a discouraged worker does not mean you are employed. You are still unemployed.
Facts aside, the Chairman made his move based on the expectation the economy will continue to grow. Hence the perfect exit scenario for the Chairman responsible for more money printing than any other throughout history ...