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Federal Reserve Chairman Ben Bernanke was once again the biggest market-mover in 2010, and the quarterly press conferences he begins next month are set to solidify his dominance, Macroeconomic Advisers said in their annual ranking.
Compared to 2009, the forecasting firm said that Fed officials’ remarks, whether in public speeches or on the media, had a bigger market reaction while statements following the Fed’s policy-setting committee meetings had a smaller impact.
The “Who Moved Markets” report, written by former Fed governor Laurence Meyer and economist Antulio Bomfim, comes a few days after the Fed announced a big change to its communications strategy. Breaking with tradition, Bernanke will take questions from the press every time the central bank publishes its economic projections. The first news conference will take place April 27, followed by press briefings June 22 and Nov. 2.
Rankings were based on the influence a given official’s remarks had on the two-year Treasury yield, which is particularly responsive to monetary policy-related issues, in a window starting 15 minutes before and ending two hours after the official speaks. For speeches that occurred at the same time as major economic releases, either the window was cut down or the speeches weren’t counted. The twice-annual congressional monetary policy testimonies presented by the Fed chairman were also exempt from the rankings.
Bernanke’s words moved Treasury yields roughly 50 basis points last year. St. Louis Fed President Jim Bullard, who gained traction within the Fed after proposing to gradually buy Treasury debt in response to the weak economy, came in a close second, with about 45 basis points.
Bullard has been more willing to do media interviews than other Fed officials and had many public meetings with groups ranging from students to local business leaders. His warning last summer that the U.S. economy could fall into Japan-style deflation got the attention of investors. Thomas Hoenig, the Kansas City Fed president opposed to the central bank’s easy-money policies, was the third biggest market-mover.
The Fed chairman also won the Macroeconomic Advisers award for having the biggest impact per speech, followed closely by Donald Kohn, who retired as Bernanke’s deputy in September, and Janet Yellen, the new no. 2 official at the Fed.
Among the speeches that stood out last year: Bernanke’s testimony on exit strategy before the House of Representatives in mid-February. The market had already started to contemplate how the Fed would unwind its huge monetary stimulus. The Fed chief outlined the sequencing of the steps that would be taken as accommodation was removed, causing the two-year yield to rise four basis points.
“The Chairman will become even more dominant in 2011,” said Meyer, adding the press briefings will give him a unique opportunity to hone the policy message.
In answering reporters’ questions about two hours after the Fed publishes its statement, Bernanke will get the final say in summarizing how the central bank is likely to steer the economy through its policies. That’s likely to give him even more influence on markets than he has now.
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However, the truth is Brian Sack at the NY Fed moves the markets the most. He controls the POMO purchases and other “basically money printing operations”. He also purchases securities, is active in the currency and futures markets. When the market is going to fall (read Japan after the quake) don’t worry this is the guy who is there to get it stabilized and rip roaring again. Most who follow the Fed should understand this, but the cult of celebrity that business publications give to top Fed officials makes me sick. I mean really, do you look up to these central planners and how they can “magically” move the markets? Do we even want to live in a market/country/world where idividuals and even small groups can do this?
The worst I have seen of the press falling to the feet of their masters at the Fed were the hailing of Greenspan as the Meastro while also telling of his “love of the free markets” and giving Bernanke Man of the Year.
This is kind of a sad really… Bernanke does not care what anyone else thinks… it is his way or the highway (ask Warsh after his gagging order expires).
The economy is getting better”…., the problem this statement is based on economic data and signs that do not represent the bottom 80% of the population.
It’s all smoke and mirrors. The economy will not get any better, if anything, it will get worse. Republicans and Democrats are equally to blame. Career politicians like Ted Kennedy to John McCain spent decades in Washington, D.C. and their only real accomplishment has been enriching themselves and their friends. Spending cuts and tax cuts won’t make any difference at this point.
Every day the situation in America keeps getting worse and all our govt does is lie to us. Obama’s act got old a long time ago. We’re still in Iraq, Afghanistan and now Libya. We can’t control our own borders. We’re flooding the country with money with quantitative easing, bankrupting our grandchildren, making bankers wealthy beyond their wildest dreams…. and the man on the street is footing the bill.
But my favorite is “inflation is non-existant.” Yeah, right.
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