No QE3, Bernanke says, and the market is disappointed

06/08/2011 11:27 am EST


Jim Jubak

Founder and Editor,

I guess the stock market is expecting Federal Reserve chairman Ben Bernanke to pull another program of quantitative easing out of his hat.

Stocks dropped at the end of the day yesterday, June 7, when Bernanke finished a speech in Atlanta without even hinting at a third round of quantitative easing.

If the Fed isn’t contemplating another round of bond buying once the current program, QE2, finishes in June, the Fed chairman made it clear that the central bank isn’t planning to tighten monetary policy anytime real soon either. He called the economic recovery “uneven” and “frustratingly slow” and said that the Fed needs to maintain the current record Federal Reserve balance sheet and near zero interest rates until the recovery has bounced back from what he maintains is a weak spot. “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”

Bernanke also noted that he doesn’t see “much evidence that inflation is becoming broad-based or ingrained in our economy.” That restrained showing on inflation gives the Fed time to keep interest rates near zero for a considerable period.

The Standard & Poor’s 500, which had been higher for the day to 1296.22 at 2:18 New York time, spent the last two hours falling ever so slowly to finish down just 1.23 points to 1284.94.


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