Bernanke signals a continuation of market support

Some market observers were looking to Federal Reserve Chairman Ben Bernanke's most recent press conference, held earlier this week, as the moment when the American central bank would announce the commencement of so-called tapering. This policy reversal has been greatly feared in global markets, as the end of Fed support could be the harbinger for future long-term volatility and risk increases.

However, Bernanke opted to stay the course as of this week, saying that while there was widespread disagreement within the Federal Open Market Committee (FOMC) about how the central bank should proceed, the voices of caution prevailed and the Fed will continue to buy roughly $85 billion per month worth of mortgage-backed securities and Treasury bonds.

"Highly accommodative monetary policy for the foreseeable future is what's needed in the U.S. economy," Bernanke said on June 10, following a speech given in Cambridge, Massachusetts. He added that the FOMC, as previously stated, reserved the right to either reduce or increase its programs depending on conditions in the jobs market and wider economy.

What does this mean for the long-term? Market behavior will continue to be in reaction to super-low credit costs thanks to the Fed's quantitative easing policy, but it's not clear whether fears over tapering – which have led to broad sell-offs worldwide – will be abated by the Bernanke speech. 

As we have stated on this blog in the past, the Fed's misguided policies are just temporary bandages in place of meaningful economic reform. Until the markets are allowed to normalize, risk judgment is still virtually impossible, making it hard for independent investors to thrive in such an environment. Those who want to protect their portfolios should consider automated trading software as just one way to keep their income safe. Explore today to learn more.