Will the real Ben Bernanke please stand up?

Ben Bernanke has many personalities and economists are wondering which Ben Bernanke will appear next week to testify to Congress about monetary policy and the economic outlook. There is the "kind and gentle" Bernanke that said the economy needed continued stimulus or the tough and impatient Bernanke who told the Joint Economic Committee it might be OK to slow down the pace of its asset-purchase program.

Greg Robb
July 12, 2013, 4:14 PM
Market Watch

Will the real Ben Bernanke please stand up?

Economists are wondering which Fed chairman will appear when he testifies on Wednesday and Thursday to Congress about monetary policy and the economic outlook.

Will it be the “kind and gentle” Bernanke, the one who told the Joint Economic Committee in late May, in his prepared remarks, that the economy needed continued stimulus? The same dovish Bernanke who on Wednesday told the National Bureau of Economic Research in Boston that it was too soon to say the economy had survived the headwinds of tight fiscal policy and that the 7.6% unemployment rate probably overstated the health of the labor market?

Or will it be the tough and impatient Bernanke who told the Joint Economic Committee in the question-and-answer session that the central bank thought it might be OK to slow down the pace of its asset-purchase program in the next few meetings. The same hawkish Bernanke who also told reporters at his press conference that asset purchases could come to an end in the middle of next year?

Ward McCarthy, chief financial economist at Jefferies & Co., thinks we will get a little of both.

The Fed is deeply divided over the question of slowing down asset purchases, he said.

Many on the Fed view quantitative easing the same as going to the dentist — they just want to get it over with.

Others on the Fed, including Bernanke, take a more moderate approach.

So Bernanke will seem dovish when expressing his own views. But when he talks for the committee, he will sound more hawkish.

In other words, the dovish Bernanke to be apparent in the prepared remarks, with the hawkish Fed chairman popping up from time to time in the question-and-answer session with lawmakers.

So will this lead to whiplash in markets?

You bet, McCarthy said.

“The likelihood that there will be tape-bombs is probably non-trivial,” agreed Michael Hanson, U.S. economist at Bank of America Merrill Lynch.

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