3/24/2023 0 Comments Goldilocks economy bernanke(Read the testimony).įollowing the comments, stocks and bonds surged, as investors bet that the economy is "in the sweet spot of not-too-hot, not-too-cold growth," said Rob Lutts, chief investment officer, Cabot Money Management, referring to what's come to be known as the Goldilocks scenario on Wall Street. The solid 3.5 percent pace of GDP growth in the fourth quarter of 2006 is expected to be revised down, Bernanke said, while GDP growth for 2007 is now expected to come in a bit slower than the Fed thought last summer, due to weakness in housing, he added.īernanke also said inflation pressures seem to be waning, adding that the Fed expects "core" inflation to ease back within the range of the Fed's presumed comfort zone by next year. "There wasn't much new there, but it does suggest a very harmonic combination and that was certainly music to investors' ears," Hoffman added.Īs always, the Fed chief threw out the caveat that if the scenario proves to be wrong, the central bank will intervene and adjust rates accordingly. In his remarks to the Senate Banking Committee, which he repeated to a House panel Thursday, Bernanke "basically said the Fed thinks we're going to have a favorable combination of sustained economic growth and less inflation, with growth a tad below potential," said Stuart Hoffman, chief economist at PNC Financial Services. In other words, make sure to take the fickle market with a grain of salt. "Then we had some comforting comments from the Fed chairman on a day when a number of people didn't make it into work because of the weather and so stocks rose." "A few days ago we were hyperventilating that the sub-prime lending market was going to hit financial stocks," he said. "I don't think it changes anything," said Charles White, a portfolio manager at ThomasLloyd Global Asset Management. But it's one that was pretty much laid out in the statement from the last Fed policy meeting in January - and it's a scenario that's been echoed by a number of recent economic reports.Īnd while the market may have celebrated Wednesday, some market pros say the outlook for the stock market this year is little changed, with the S&P 500 expected to rise just a bit less than 10 percent this year after jumping 13.6 percent last year. Overall, it was a market-friendly forecast, sure. From the euphoric reaction you might have thought Bernanke said something wildly upbeat and thoroughly unexpected.
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