This morning Ben Bernanke spoke to the National Association for Business Economics and stated that the Central bank will continue it’s supportive policy even as unemployment rates decline. He said that the U.S. economy needs to grow more quickly if it is to produce enough jobs to bring down the unemployment rate further. In other words, we still have a long way to go before we are back to normal unemployment rates. Mr. Bernanke did also make it known that QE3 was still on the table. This means that they will likely keep interest rates low for some time to come, which hopefully will drive unemployment ever lower.
These are very comforting comments for the market, and so we see that it’s rallying up again today. The optimism in the market right now is at some pretty high levels. The stock indexes are pushing ever closer to their pre-2008 crash levels.
Bernanke did however say that he is concerned that this recent improvements in unemployment may be temporary and short-lived. This is another reason the Fed is not ready to tighten monitary policy yet.