Ben Bernanke delivered a prepared speech to the congressional Joint Economic Committee Wednesday in which he stated that inflation is "somewhat elevated", but that it's no reason to expect a Fed Funds Rate hike anytime soon. Some of Chairman Bernanke's more salient points:
- Economic growth has slowed because of a "substantial correction" in the housing market
- Sub-prime industry problems are self-contained (so far)
- Business spending will pick up this year
- Consumer spending will propel the economy forward
- Inflation is down largely because of energy costs are down
In other words, there are multiple reasons why inflation is higher than desired and even Bernanke admitted that there are upside and downside risks to each of these points. As a result, markets had a hard time digesting the text.
Immediately following his speech, mortgage rates improved, but by the end of the day, rates had swung back to unchanged.
