In late April, Fed Reserve Chairman Ben Beranake made a comment that caused a drop in stock prices. He know acknowledges that his comment was a mistake. Stock and bond prices had rallied in April when Bernanke reported to the Joint Economic Committee that the Fed may suspend rate hikes at future meetings. However, later he told CNBC anchor Maria Bartiromo a different story at a White House Correspondents' Association Dinner. "He said, flatly, no," Bartiromo reported of Bernanke's response to her inquiry as to whether the media and financial markets were correct to believe that he had signaled a pause in rate hikes. A severe drop in stock prices occurred on the day of Bartiromo's report. Bernanke recently acknowledged that he made a bad decision. "I want you to be careful about what you say because people are going to follow your words very closely," reminded Senator Jim Bunning. Bernanke told the Senate Banking Committee that the conversation with Bartiromo was a lapse in judgement. "In the future, my communications with the public and the markets will be entirely through regular and formal channels," he explained. After 16 consecutive quarter-percentage point increases, Bernanke has said that any potential increase in interest rates at the next meeting, June 28-29, will highly depend on data. Analysts are currently attempting to guess what data will influence the Fed decision. Recently, stock and bond prices have bounced up and down in response to changes in oil prices, sales, housing trends and inflation reports. The Fed has grown increasingly secretive over what increases are based upon. Both stock and bond prices have become more volatile as a result. |
