FYI | Feb 15 2007
By Greg Peel
“So far, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing of core inflation”.
So said Fed chairman and known inflation fighter “Helicopter” Ben Bernanke in his mandatory “testimony” to the US Congress last night. The good news was a combination of moderating inflation, no signs of an unemployment problem, and a housing market that appears to be stabilising.
The Dow responded strongly, pushing up 87 points to close at 12,742.
The show is not over yet, however, as analysts will still be pouring over the text looking for more specific clues on monetary policy moves ahead. There will be more commentary to come from Bernanke, and he will be fielding questions from legislators tonight.
However, while Bernanke suggested the Fed is “poised” to jump if any signs of increased inflation reappear, things seem fairly settled for now. The fall in crude prices provided the relief. Analysts are now moving back towards thoughts of the next move in rates being down, some time ahead.
It sounds like Bernanke could have taken his script straight from RBA chairman Glenn Stevenson. A very similar statement with a very similar market response.
While one would expect the good economic news to provide impetus for the US dollar, things don’t work that way. Given the chances of another rate hike appear to have diminished, the dollar was sold off. This sent precious metal prices pushing higher once more, despite another down night in oil.
On the base metal front, both zinc and nickel continued their volatile turnarounds, with both up 4%. The other metals were steady. This sort of move will hearten metals analysts, given consensus constantly reiterates that these two metals are in such short supply their prices must push higher in 2007. Not so for aluminium and copper.
Signs are for another good day on the local bourse, with the SPI overnight closing up 26 points.