helicopter Ben has all the reasons to opt for caution

"helicopter Ben" has all the reasons to opt for caution. On the eve of the vote of the banking commission of the Senate on its renewal, the pattern of the US Federal Reserve (Fed), Ben Bernanke, was named "man of the year" by the "time" magazine for its "imaginative management." Although it had been sharply criticized by some Republican elected officials, the pattern of the Fed has all the probabilities of obtaining a positive decision of the Senate in January. In this context of waiting and the weakness of the recovery, the monetary policy Committee confirmed yesterday his intention to maintain its rate close to zero (between 0 and 0.25) for an extended period. The Fed also said the schedule of the "crisis exit strategy", with the progressive judgment of its funding after facilities more than doubled the size of its balance sheet (at 2.190 billion) over two years.

No risk of bubble

"Economic conditions, including low use of resources, the trend towards contained inflation and inflation expectations stable, should ensure an exceptionally low rates for a long time," the Committee noted in its release. He adds, however, that "the deterioration of the employment market slows." For the President of the Fed, the escalation of the price of gold, who has spent the bar $ 1,200 an ounce or the rebound of 60 of the New York Stock Exchange since nine months suggest the risk of a bubble or inflationary risks in the short term. For the majority of analysts, despite the acceleration of growth, which could reach 4 in the last quarter (against 2.8 in the third quarter), the Committee on monetary policy of the Fed should not raise rates before the second half of 2010. In support of this guidance, published yesterday in the consumer price index increased only by 0.4 in November (compared to 0.3 in October). However, the Committee confirmed the gradual slowdown of its programs for purchase of asset-backed agencies (1,250 billion) in mortgage loans and debt of agencies ($175 billion), for a total judgment at the end of the first quarter of 2010, at the same time that its facilities funding (TSLF, TAF...)

Balance to standardize

"Even if the recession is no doubt technically behind us in the direction where the economy has resumed growth, we will continue to feel it for some time because unemployment remains very high, 10," says Ben Bernanke in his interview to the magazine "Time". The Committee recognizes, however, a few "signs of improvement" in the housing sector and a moderate recovery in consumer spending, despite the persistent tendency of companies to reduce fixed investment and their reluctance to recruit. In its last forecast in November, the Fed also provided a limited decline in the unemployment rate to a range of 9.3 9.7 in the fourth quarter of 2010 (compared to 10 in November). Admission of Ben Bernanke, despite the slightly embellished in November, the modest recovery in growth in 2010 should contribute to a reduction in unemployment "at a rate less than what we would like to." The New York Fed President William Dudley, made no secret that US GDP growth is expected to fall next year to a level below that of the second half of 2009, "given temporary sources of strength."

In the opinion of some minority economists, the Fed may fuel inflationary risks at the end of two years, delaying too monetary tightening. But after the apparent success of its quantitative policy of buy-outs of assets, the Central Bank will first give priority to the standardization of its balance sheet.