Fed chief Ben Bernanke showed his influence over the financial markets yet again today.
The Federal Reserve chairman said today that “accommodative policies” such as low interest rates will remain in place to support the ongoing economic recovery in the U.S. Stocks have rallied 1% on the news, erasing most of the losses from last week’s rare dip.
Both the S&P 500 and the Dow Jones Industrial Average are up 1% today. The Nasdaq has made even bigger gains, with a 1.46% increase.
At 1,411, the S&P has not only recovered the seven points the index lost last week but already tacked on seven more points to reach its highest level since May 2008.
Such is the power of Ben Bernanke, apparently.
His message today was unchanged from what he’s said for the past two months – that the central bank will continue to support monetary policies in the form of interest rates that are near zero. Bernanke’s reasoning was that such measures will help spur enough economic growth to help reduce the unemployment rate further.
Some analysts are speculating – as they have in recent weeks – that the Fed’s accommodative policies could include a third quantitative easing, known as QE3. Quantitative easing is a monetary policy through which the Federal Reserve prints money for the purpose of buying billions of dollars of Treasury bonds and mortgage-backed securities when interest rates are near zero.
Bernanke and the Fed reiterated earlier this month that they intend to keep interest rates near zero through at least 2014.