No time for much reckoning today.
Dow up 20. Gold up $20.
Associated Press reports:
NEW YORK (AP) – Stocks posted small gains Thursday after Federal Reserve chairman Ben Bernanke said the central bank will stick to its efforts to spur the economy.
In a speech at the National Press Club, Bernanke said that the Fed expects the economy to improve this year and inflation to remain low despite the jump in commodity prices.
“Chairman Bernanke basically indicated in his speech that he considers unemployment to be the bigger problem than inflation and that the Fed will continue to focus on that,” said Doug Roberts, chief market strategist at Channel Capital Research.
The Federal Reserve has a plan to buy $600 billion in bonds, a tactic known as quantitative easing, aimed at spurring lending and making stock ownership more attractive. Some economists had worried that the Fed could end its bond purchases earlier than anticipated.
Stocks had fallen for the most of the day as concerns over violent protests in Egypt weighed against better-than-expected economic news in the US.
Meanwhile, inflation in primary, international auction priced goods is beginning to work its way into consumer prices everywhere. Bloomberg has that story:
India’s food inflation accelerated to a one-month high and services growth quickened, bolstering the case for more interest-rate increases.
An index measuring wholesale prices of agricultural products rose 17.05 percent in the week ended Jan. 22, the commerce ministry said in a statement in New Delhi today. The Purchasing Managers’ Index rose to 58.1 in January from 57.7 in December, according to HSBC Holdings Plc and Markit Economics. A reading above 50 indicates an expansion.
Asian economies from South Korea to China and India are facing inflation pressures, prompting the International Monetary Fund Managing Director Dominique Strauss-Kahn to say this week that central banks in the region need to raise borrowing costs further. The Reserve Bank of India on Jan. 25 boosted rates for the seventh time in a year and signaled more increases.
Ben Bernanke is talking nonsense. Well…nonsense of a particular sort. He wants to inflate the economy. His line of talk explains why…
Federal Reserve Chairman Ben S. Bernanke said the US needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold.
“With output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,” Bernanke said today in a speech at the National Press Club in Washington. “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”
Bernanke said economic growth will pick up this year and the Fed’s purchases of $600 billion in Treasuries are “providing significant support to job creation and the economy.” At the same time, his emphasis on labor-market weakness means the central bank is likely to leave stimulus in place for a while, said Michael Feroli, chief US economist at JPMorgan Chase & Co. in New York.
“The Fed is still in a very growth-supportive policy stance,” said Feroli, a former Fed researcher. “I don’t think they make any premature feints toward heading to the exit.”
Bernanke still regards the threat of deflation as greater than the threat of inflation. Or, he says he does.
We judge them about equal and figure they’ll both hit us. Hard.
And more thoughts…
Did we say we had more thoughts? We don’t have time for more thoughts. Not today. The thoughts will have to wait until next week.
for The Daily Reckoning Australia