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Bernanke Takes Center Stage

At 10:00 am, new Fed Chairman Ben Bernanke will address Congress with his first semi-annual report on the economy.  He testifies before the House Financial Services Committee today and the Senate Banking Committee tomorrow.

The markets (with the Dow freshly above 11,000 yesterday, though slipping today pre-market) are in a bit of a twist about it, as some folks are worried he may trumpet a bloodier inflation battle than Greenspan waged.  Most immediately at issue is whether (through discussion of either current inflationary pressures or his philosophy on monetary policy in general) Bernanke will telegraph the likelihood of more than one additional rate hike before the Fed pauses.

[But wait, there's more...]

I wouldn't expect him to particularly allay anyone's fears (nor to stoke them) through any hints or winks in his testimony this week, but that won't stop market watchers from dissecting every word he utters to try to strip out hidden meaning.  In the end, I think the hand-wringing over prospects of a more vigilant Fed under Bernanke is overblown.  Greenspan was a dogged crusader against inflation, laying down a record that would seem to set the likely upper bound of his successor's range of pugnacity.

I think simply having this debut performance in the rear view mirror will provide some solace for this enduringly sideways market.  Any time uncertainty is assuaged, market glee tends to beat back gloom (and the glee is out there, waiting to be reveled in).  So assuming Bernanke doesn't renounce capitalism and run around the chamber with no pants on, I suspect today's hearing is a market buoying one.

During tomorrow's testimony on the Senate side, I'd watch for some grandstanding (*gasp*) among the Senators on the Banking Committee.  Since the Q&A portions of these sessions are fairly broad-based, and as this is the first time legislators are encountering a new Fed regime in 18 years, I'd be shocked if we didn't see attempts to exhort a few quotables, most likely on the issues of tax policy and Social Security reform.

Further, I'll make the brazenfaced prediction the bulk of such exhortative grandstanding will come from the left.  Not that Republicans wouldn't be equally keen on leveraging the Chairman's viewpoint to bolster their own initiatives, but the status quo set by Greenspan (unabashedly in favor of tax cuts and Social Security reform; maligned by Harry Reid as "one of the biggest political hacks" in Washington) was such that any shift in philosophy (if only a move away from Greenspan's explicitness) would likely imbue Democrats' with incremental validation of their pro-tax, anti-reform agenda.

Plus, the Banking Committee counts among its members the granddaddy of grandstanders himself, so Ben's not getting out of there without some measure of berating and abuse.

I won't be able to liveblog the session this morning, but watch for a recap later today.

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Update: Recap

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Bernanke Takes Center Stage

At 10:00 am, new Fed Chairman Ben Bernanke will address Congress with his first semi-annual report on the economy.  He testifies before the House Financial Services Committee today and the Senate Banking Committee tomorrow.

The markets (with the Dow freshly above 11,000 yesterday, though slipping today pre-market) are in a bit of a twist about it, as some folks are worried he may trumpet a bloodier inflation battle than Greenspan waged.  Most immediately at issue is whether (through discussion of either current inflationary pressures or his philosophy on monetary policy in general) Bernanke will telegraph the likelihood of more than one additional rate hike before the Fed pauses.

[But wait, there's more...]