Markets & Finance

Vital Signs: Bernanke Speaks to Congress


On deck: Home prices, consumer confidence, existing home sales, three regional business surveys, revised GDP data, and testimony by Bernanke

Federal Reserve Chairman Ben Bernanke takes center stage this week, as he goes up to Capitol Hill to present the Fed’s twice-yearly Monetary Policy Report to the Congress. Current circumstances are starkly different from those surrounding the Fed’s last report in July. Back then, the Fed projected the economy would grow between 1% and 1.6% in 2008 and between 2% and 2.8% in 2009, while it was concerned about energy-fueled inflation. The numbers Bernanke will present to the Senate Banking Committee on Tuesday will show the economy contracted about 0.5% last year, along with a projected decline between 0.5% and 1.3% this year. And now the Fed’s worry is deflation, not inflation.

A cornerstone of Bernanke’s testimony will most likely be a review of the Fed’s various lending facilities, their objectives, and their effectiveness in restoring more normal credit-market functioning. One of Bernanke’s major tasks right now is to communicate to lawmakers and investors how all these pieces of unconventional measures fit together into a unified monetary policy, and how they will work to achieve the Fed’s goals to support the credit markets and the economy. Bernanke has already laid out a broad outline of the Fed’s strategy in speeches on Jan. 13 and again before the House Financial Services Committee on Feb. 10. However, these programs continue to change in size and scope.

The markets will be especially interested in the expansion of the Fed’s Term Asset-backed securities Loan Facility (TALF), from $200 billion to up to $1 trillion. The TALF, not yet operational, was originally set up to buy high-grade securities backed by credit card loans, auto loans, and loans to small businesses and students. The intent is to revive the securitization of these loans and provide more credit to these key sectors. The expansion will include private-label residential mortgage-backed and commercial mortgage-backed securities (MBS). Those purchases will be in addition to another program, already in progress, to buy $600 billion in debt and MBS from government agencies--a strategy aimed at kick-starting mortgage securitization and reducing mortgage rates.

In addition to a run down of the Fed’s current efforts, the markets will also be interested in Bernanke’s thinking on purchases of longer-term Treasury securities. The Fed chief raised this possibility a few weeks ago, much to the bond market’s interest, but he has been mum on the subject in recent weeks.

Finally, deflation will also be a key topic. Minutes of the Fed’s Jan. 27-28 meeting showed growing concern that inflation could fall too low. Many private economists believe deflation is a real possibility in the coming year, given the sizable amount of slack that is expected to develop in the economy. The Fed has already responded by issuing a "longer run" projection of inflation in its latest minutes. That projection is ostensibly an inflation target that is meant to anchor inflation expectations, and convince the markets that the Fed will do what is necessary to achieve that target and avoid deflation.

Here’s the weekly economic calendar, from Action Economics:

Top Economic Reports

Reports

Date

Time

For

Median Estimate

Last Period

Consumer Confidence

Tuesday, Feb. 24

10:00 a.m.

February

36.9

37.7

Existing Home Sales (Millions)

Wednesday, Feb. 25

10:00 a.m.

January

4.795

4.740

Durable Goods Orders

Wednesday, Feb. 25

8:30 a.m.

January

-2.1%

-3.0%

New Home Sales (Millions)

Wednesday, Feb. 25

10:00 a.m.

January

0.331

0.331

GDP (Preliminary)

Friday, Feb. 27

8:30 a.m.

Q4

-5.1%

-3.8%

GDP Chain Price Index (Preliminary)

Friday, Feb. 27

8:30 a.m.

Q4

-0.1%

-0.1%

Chicago Purchasing Managers Index

Friday, Feb. 27

10:00 a.m.

February

34.0

33.3

Consumer Sentiment Index (Final)

Friday, Feb. 27

9:55 a.m.

February

58.0

56.2

Other Reports and Events

Reports/ Events

Date

Time

For

Dallas Fed Survey

Monday, Feb. 23

10:30 a.m.

February

ICSC-UBS Store Sales

Tuesday, Feb. 24

7:45 a.m.

Feb. 15-21

Johnson Redbook Weekly Store Sales

Tuesday, Feb. 24

8:55 a.m.

Feb. 15-21

S&P Case Shiller Home Price Index

Tuesday, Feb. 24

9:00 a.m.

December

FHFA Home Price Index

Tuesday, Feb. 24

10:00 a.m.

December

Richmond Fed Survey

Tuesday, Feb. 24

10:00 a.m.

February

TESTIMONY: Fed Chairman Bernanke

Tuesday, Feb. 24

10:00 a.m.

Mortgage Applications

Wednesday, Feb. 25

7:00 a.m.

Feb. 15-21

Initial Unemployment Claims

Thursday, Feb. 26

8:30 a.m.

Feb. 15-21

SPEECH: San Fran. Fed President Yellen

Friday, Feb. 27

10:00 a.m.

SPEECH: St. Louis Fed President Bullard

Friday, Feb. 27

10:00 a.m.

Earnings Calendar

Company

Report Date

Developers Diversified Realty

Monday, Feb. 23

Nordstrom

Monday, Feb. 23

DTE Energy

Monday, Feb. 23

Campbell Soup

Monday, Feb. 23

Home Depot

Tuesday, Feb. 24

Medco Health Solutions

Tuesday, Feb. 24

Tenet Healthcare

Tuesday, Feb. 24

Sempra Energy

Tuesday, Feb. 24

Health Care REIT

Tuesday, Feb. 24

Range Resources

Tuesday, Feb. 24

Nabors Industries

Tuesday, Feb. 24

Office Depot

Tuesday, Feb. 24

Wynn Resorts

Tuesday, Feb. 24

Target

Tuesday, Feb. 24

PG&E

Tuesday, Feb. 24

HJ Heinz

Tuesday, Feb. 24

RadioShack

Tuesday, Feb. 24

Vornado Realty Trust

Tuesday, Feb. 24

Macy's

Tuesday, Feb. 24

Centerpoint Energy

Wednesday, Feb. 25

JM Smucker

Wednesday, Feb. 25

RR Donnelley & Sons

Wednesday, Feb. 25

Frontier Communications

Wednesday, Feb. 25

TJX

Wednesday, Feb. 25

Integrys Energy Group

Wednesday, Feb. 25

Express Scripts

Wednesday, Feb. 25

Fluor

Wednesday, Feb. 25

Salesforce.com

Wednesday, Feb. 25

Flowserve

Wednesday, Feb. 25

Washington Post

Wednesday, Feb. 25

CMS Energy

Wednesday, Feb. 25

Ltd Brands

Wednesday, Feb. 25

Dynegy

Thursday, Feb. 26

Sears Holdings

Thursday, Feb. 26

Iron Mountain

Thursday, Feb. 26

ENSCO International

Thursday, Feb. 26

American Tower

Thursday, Feb. 26

NASDAQ OMX Group

Thursday, Feb. 26

Novell

Thursday, Feb. 26

Kohl's

Thursday, Feb. 26

The Gap

Thursday, Feb. 26

Southwestern Energy

Thursday, Feb. 26

Autodesk

Thursday, Feb. 26

Safeway

Thursday, Feb. 26

El Paso

Thursday, Feb. 26

Rowan Cos

Thursday, Feb. 26

King Pharmaceuticals

Thursday, Feb. 26

Public Storage

Thursday, Feb. 26

Dell

Thursday, Feb. 26

Leucadia National

Friday, Feb. 27

American International Group

Friday, Feb. 27

Brown-Forman

Friday, Feb. 27

Nicor

Friday, Feb. 27

Interpublic Group

Friday, Feb. 27

Republic Services

Friday, Feb. 27

Titanium Metals

Friday, Feb. 27


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