Jeffrey: Bernanke plays long game as equity markets take fright

MONETARY POLICY

The Chairman of the US Federal Reserve, Ben Bernanke, has started to play the long game, albeit he is unlikely to be in the chair when the moment about which he is currently warning actually becomes reality.

It is ironic that equity markets took such fright at Bernanke’s testimony in May, since what he said was actually quite benign. Although the Fed expects growth to be appreciably stronger than widely expected, he still wanted to see inflation higher, and interest rates would not be raised until 2015. What is not to like about that? Well, he also said that the pace of quantitative easing (QE) would likely start to slow later this year – the so-called tapering process. Immediately, there were reams of comment suggesting how dangerous this could prove. The most frequently used analogy was...