Bernanke's Letter Says There Is Room to Ease

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Market Mover: Bernanke Says There is Room To Ease

After opening lower, stocks have rebounded strongly and are now up more than 0.5% on the day. The move is being attributed to a WSJ article penned by Jon Hilsenrath which reviews a letter written by Fed Chairman Bernanke to Rep Darrell Issa defending Fed policy.

In the letter dated Aug. 22, Bernanke wrote, "There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery."

According to the Journal, Bernanke was responding to questions posed by U.S. Rep. Darrell Issa (R., Calif.), chairman of the House oversight committee. Issa had asked Bernanke if it was premature to consider additional monetary moves.

In the letter, Mr. Bernanke said that "because monetary policy actions operate with a lag," the Fed must make policy "in light of a forecast of the future performance of the economy."

Recall that stocks had sold off this week on fear that the Fed may not be able to begin another round of quantitative easing due to the improving economic data. Front and center in this argument were the comments from James Bullard who told CNBC Thursday that the recent FOMC minutes were “a bit stale.”

Thus it would appear that Bernanke’s letter to Rep Issa has put the potential for more QE back on the table. As of this writing, the DJIA has moved up more than 100 points off the low of the day and now stands higher by 76 points (0.56%).

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