As part of his semi-annual appearance before the Congress to report on progress towards price stability and maximum eployment, Fed Chairman Ben Bernanke will be appearing next week July 21 to do just that. What some people are hoping to hear is the planned exit strategy following the doubling of the Fed’s balance sheet in order to boost liquidity in the market, support the financial institutions and provide financing to other firms that were being hit by the absence of credit in the market.
Some of the Fed’s programs include the Commercial Paper Funding Facility, which holds $109.2 billion in notes issued by corporations, the Term Asset-Backed Securities Loan Facility or TALF, mainly intended to buy asset back securities, and the purchase of mortgage-backed securities, Treasury notes, and federal housing agency bonds, worth up to $1.75 trillion.
A couple of remarks made from a Bloomberg report:
“Now is the time to articulate the exit strategy. The Federal Reserve doesn’t speak with one voice and the testimony is an opportunity to present the consensus view.” -Vincent Reinhart, former monetary-affairs director at the Fed and now resident scholar at the American Enterprise Institute in DC.
“Chairman Bernanke’s semi-annual testimony would be a logical place to lay out these issues in a more detailed discussion. The more credibility the Fed can cultivate with investors on the exit strategy, the freer it is to pursue stimulative policies in the near-term without leading to sharply higher inflation expectations.” – Dean Maki, chief economist at Barclays, based in New York.
I am similarly waiting for this. People failed to get anything meaningful from the minutes of the Fed’s meeting last month, a period some thought the Fed might begin to reveal plans for the many programs it has implemented so far. Even with the removal of some, there are still a lot in place that maintains a lot of money in the system. General guidance, in my opinion, would suffice for the chairman to lay out.