04/27/2011 09:36 am ET Updated Jun 27, 2011

Fed Chief Bernanke Holds First Press Conference (LIVEBLOG, UPDATES)

Federal Reserve chairman Ben Bernanke will hold his first ever press conference later today -- and the financial world is hanging on his every word. Facing high unemployment, concerns about a stalled recovery, inflation and the housing market, Bernanke's decision to speak publicly has been seen by many as "high stakes gamble" intended to lift the veil of secrecy from the Fed. Check back here for regular updates, video and analysis.

04/27/2011 5:08 PM EDT

An Alternative Version Of Bernanke's Speech

Moments after Ben Bernanke concluded his first-ever press conference, the Washington Post's Ezra Klein published his version of what the Federal Reserve chairman should have said to the media.

Klein's proposed response leans heavily on admitting past mistakes while honestly assessing the present situation, rather than offering firm policy guidelines within the approved responsibilities of the Federal Reserve. "I have a lot of power," Klein says Bernanke should have said. "But I'm not a dictator."

In Klein's alternative reality, Bernanke takes responsibility for "not doing enough" to counteract a stubbornly high unemployment rate that has left millions "suffering unnecessarily." Klein then rails against Congress for extending Bush-era tax cuts to America's wealthiest citizens.

"[I]n conclusion, the economy is terrible, we should be doing more, and Congress should be doing much more," Klein writes for Bernanke. "[B]ut instead we’re going to pretend the economy isn’t that bad."

Read the whole thing here.

04/27/2011 4:28 PM EDT

Stocks Up

Stocks ended the day up, after the Fed's press conference. The S&P 500 rose 0.62 percent, and the Dow went up 0.76 percent.

Bernanke signaled the Fed would take its asset-purchased program to completion, and would keep the main interest rate where it is for at least several more months. These policies lower interest rates throughout the economy, making relatively high-yield assets like stocks or corporate bonds more attractive. —William Alden

04/27/2011 4:15 PM EDT

Bernanke Doesn't Address Wall Street Speculation In Gas Price Spike

When discussing the recent run-up in gas prices, Bernanke did not mention the word speculation. There is no question that unrest in the Middle East has contributed to higher prices at the pump, but Bernanke didn't address the idea that Wall Street bets in the commodity markets has contributing to to higher fuel prices.

The Commodities Futures Trading Commission and Goldman Sachs have both said there are more speculative bets being placed on commodities right now than at any time in history. It’s possible that this is merely a coincidence, of course, but at least one major Wall Street bank thinks that speculation is driving up prices.

Read more about the link between commodity speculation and gas prices

Bernanke made similar comments when gas prices eclipsed $5.00 a gallon in 2008. At that time, the global supply of oil had increased, while the global demand for oil had decreased, according to the U.S. Department of Energy. But, despite a fundemental situation that would suggest lower prices, prices were flying high.

After the price of oil broke $147 a barrel in June 2008, the price plunged abruptly, eventually falling below $40 a barrel by the end of the year. Those wild swings prompted a host of economic studies that found speculation was at least contributing to price volatility, if not causing it outright. -- Zach Carter

04/27/2011 3:45 PM EDT

Inflation Vs. Jobs

Bernanke's argument about inflation isn't consistent, economist Paul Krugman says.

The Fed's asset-purchase strategy is partially intended to promote maximum unemployment, but some experts are concerned that it will ultimately spark inflation once the recovery takes hold and the system remains awash in liquidity. In this view, there's a tradeoff between jobs and prices.

Bernanke, however, doesn't take this view: He said in the press conference that core inflation, or, as Krugman says, "inflation inertia," isn't a concern -- and that expansionary monetary policy doesn't stoke these forces.

But then, Bernanke is also saying that any further expansion would risk provoking inflation, Krugman notes. He continues:

This doesn’t make any sense in terms of his own expressed economic framework. I think the only way to read it is to say that he has been intimidated by the inflationistas, and is looking for excuses not to act.
— William Alden

04/27/2011 3:41 PM EDT

Why Fed Decided To Institute Press Conferences

In response to a question about the decision to institute press conferences themselves, Bernanke asserted that the Federal Reserve has become a "very transparent central bank."

"I've personally always been a believer in providing as much information as you can," Bernanke said to reporters. Despite fears that increasing the Fed's media presence would create additional levels of volatility in the market, the Fed eventually concluded additional transparency "outweighs some of these risks," Bernanke said. -- Maxwell Strachan

04/27/2011 3:05 PM EDT

Long-term Unemployment: 'Out Of The Scope'

There's little the Fed can do to target long-term unemployment in particular, Bernanke said.

Part of the Fed's mandate is to promote maximum employment. But two months from the end of the second asset-purchase program, the unemployment rate is high, at 8.8 percent. The number of long-term unemployed, people who have been out of work for at least six months, is now higher than it's ever been since World War Two, Bernanke said.

But there's only so much the Fed can do, the chairman said.

"We dont have any tools for targeting long-term unemployment specifically. We can just try to make the labor market work better broadly speaking," he said.

"It becomes really out of the scope of monetary policy. At that point, job training, education and other types of interventions would probably be more effective." —William Alden

04/27/2011 2:58 PM EDT

Inflation Concerns

Discussing whether to focus on the jobs crisis or inflationary concerns, Bernanke says the "tradeoffs are getting less attractive."

Additionally, Bernanke indicates that any significant wage increases would come at the cost of less manageable inflation. Over time, he says, monetary policy will be less fit to fight unemployment crisis than other government tools like education. —Maxwell Strachan

04/27/2011 2:43 PM EDT

Gas Prices

The central bank can't do anything about gas prices, Bernanke said: "The Fed can't create more oil."

Asked why oil prices are rising, he blamed supply and demand, saying conflict in the Middle East and North Africa has constrained supply, driving prices upward.

"This is a very adverse development," Bernanke said. "It accounts for pretty much almost all of the increase in our inflation forecast in the near term."

04/27/2011 2:28 PM EDT

Unemployment Forecast

Bernanke gave his projection for the unemployment rate:

8.4-8.7 percent by the fourth quarter of this year.

6.8-7.2 percent by the fourth quarter of 2013.

Also: Bernanke said he hasn't yet seen the first quarter GDP number. But he expects it to be less than 2 percent.

04/27/2011 2:19 PM EDT

Reading Into The FOMC Statement

There may be more to the Fed statement than meets the eye. Bernard Baumohl, chief global economist of the Economic Outlook Group, suggests Fed insiders might have seen a key datapoint that hasn't yet been made public. He writes in a note to clients:

Did Bernanke get a sneak preview of tomorrow's GDP report for the first quarter?

We ask this question because a careful read of the FOMC statement suggests there is growing concern the US economy will next struggle through a period of stagflation.

In the very first sentence, the FOMC downgraded its March description of the recovery from one that is on a "firmer footing" to a more flaccid "proceeding at a moderate pace." The change in wording likely indicates first quarter growth was less than the fourth quarter's 3.1%, perhaps slipping closer to 2.5%. Our own forecast calls for a deceleration to 2.1%

-- William Alden