What the market wants is a clear road map for Fed policy. They want to be told definitively that the central bank will or will not ease next month. Unfortunately being straightforward has never been one of the Fed Chairman's strongest personality traits and hoping for a clear road map tomorrow may be wishful thinking. Yet the one situation where Bernanke could still drop hints about easier monetary policy is if they already agreed to ease monetary policy through something other than Quantitative Easing. One possible option would be to extend their low rates pledge beyond 2014 or to tie interest rates with economic data. Both of these options would mark an important shift in U.S. monetary policy and is less drastic than a third round of Quantitative Easing and cheaper than asset purchases.
However there are plenty of reasons why Bernanke could choose to remain elusive about monetary policy. While the world was surprised by how close the Fed was to increasing stimulus in early August, the economy has improved since then. According to the Beige Book, there are signs of life in parts of the U.S. economy and continued challenges in others. The lack of consistency in the U.S. economy is the very reason why Bernanke could choose to wait until the latest official Fed forecasts are completed and the next non-farm payrolls report is released before committing to any fresh policy changes. Also, having provided signals to major policy changes at the last 2 Jackson Hole Summits, Bernanke may want to move away from the expectation that Jackson Hole is a forum for announcing policy changes.
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