- The Fed will 'act as needed' to stem the impact of market turmoil
- The Fed 'stands ready' for more actions to provide liquidity
- It is not the Fed's responsibility to 'protect' investors
- Financial losses exceed most pessimistic forecasts
- Sustained credit tightening could hurt growth - BUT - outside subprime, deterioration is less pronounced
- The Fed is paying particular attention to 'timeliest' indicators, as past months' data has been less useful than usual
What we can take from this: Bernanke is trying to reassure investors that the Fed will be supportive of the financial markets, but they are not prepared to 'bail out' investors with a rate cut quite yet. Given Bernanke's notation that the Fed will be watching the 'timeliest' indicators, we have to assume that he is referring to labor market data. We will get our next taste of it next Friday when non-farm payrolls for the month of August will be released, and given some of the dour data we've seen so far (the Chicago PMI employment gauge plummeted, many companies associated with subprime mortgages have let go most of their workers), the labor market numbers are likely to disappoint.
For the full speech text: http://www.federalreserve.gov/boarddocs/speeches/2007/20070831/default.htm
-- Terri Belkas, Currency Analyst for DailyFX.com
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