InvestmentsMay 22 2013

Markets eye key US Federal Reserve speech

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Global markets have entered jittery trading amid fears that Ben Bernanke might signal an early exit of the US Federal Reserve’s $85bn (£56bn) asset-buying programme.

Mr Bernanke will speak to congress about monetary policy and also deliver the minutes of the bank’s latest rate-setting Federal Open Market Committee (FOMC) meeting at 15:00 BST today.

The FTSE 100 index of UK shares is 0.12 per cent lower this morning as traders take stock ahead of the all-important presentation.

“The testimony to congress by Fed chairman Ben Bernanke is likely to emphasise that the Fed stands ready to quicken or slow the pace of its monthly asset purchases,” Capital Economics’ US economist Paul Ashworth said.

He said that data from last month had been reassuring, with strong employment and underlying retail sales, but that it appeared officials were not worried by recent declines in real inflation.

Peter Dixon, global equity economist at Commerzbank, said that some members of the FOMC had made it known they wanted to exit QE early, but that Mr Bernanke would rather “keep shoving coal onto the fire”, as he wants to do as mych as he can to pump liquidity into the US economy.

“The problem in the US at the moment is that inflation rates are low and could get lower. Ben Bernanke’s prediliction is to ease monetart policy as much as possible and we shoudlnt expect QE to end any time soon,” he said.