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World looks to Bernanke

When he takes questions this week after a Federal Reserve meeting, Chairman Ben Bernanke will confront investors' fears that rates are headed higher.
By MARTIN CRUTSINGER Published: June 18, 2013
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Some analysts think Bernanke will signal to investors that the Fed has no immediate plans to curtail its stimulus.

“The Fed has worked very hard to get stock prices and home prices rising to help the economy, and I don't think they want to back away from that in any way,” said Mark Zandi, chief economist at Moody's Analytics. “I think Bernanke will deliver a strong message that the Fed is not going to taper until the job market is improving in a consistent way.”

Last month, the U.S. economy added a solid 175,000 jobs. But the unemployment rate was 7.6 percent. Economists tend to regard the job market as healthy when unemployment is between 5 percent and 6 percent.

Since Bernanke's vague public comments May 22, the Dow Jones industrial average has fluctuated sharply and shed about 3 percent of its value. But the bigger shock has been in the bond market. The rate on the benchmark 10-year Treasury has jumped from a low of 1.63 percent in early May to 2.13 percent.

By historical measures, the rate on the 10-year Treasury is still extraordinarily low. It would have to rise dramatically, for example, to return to where it was during the 2000s, when it ranged mainly between 4 percent and 6 percent.

Still, higher rates ripple through the economy by making mortgages and other loans costlier.