Beige Book
Bernanke defended the Fed’s bond purchases in testimony to Congress on Feb. 26, saying the benefits of reducing borrowing costs and fueling growth outweigh any potential harm from rising inflation as a result of the bond purchases. The Fed said price pressures were “modest” in its Beige Book business survey, released March 6, which is based on reports from its 12 regional banks.
The tax increases and budget cuts that went into effect Jan. 1 may trim as much as 0.6 percentage point off gross domestic product, Congressional Budget Office Director Douglas Elmendorf told lawmakers at a hearing on Feb. 13. GDP will expand 1.8 percent in 2013, down from 2.2 percent in 2012, according to the median estimate of 75 economists surveyed by Bloomberg.
Bernanke has faced limited inflation so far, as the PCE has averaged 2.1 percent since he took office in January 2006, according to Commerce Department data compiled by Bloomberg. That’s below the 3.8 percent average from the January 1960 start of monthly data until the beginning of his term.
“Unemployment is still high, inflation still benign, the Fed is still supporting the market and there are still problems globally, which means low yields,” Matthew Duch, a fund manager at Calvert Investments in Bethesda, Maryland, which oversees more than $12 billion in assets, said in a telephone interview March. 5. “You aren’t going to get outsized returns, but yields certainly aren’t going to spike in this new rate environment any time soon.”