A word worth millions from US Fed CEO
It seems a misplaced word is all it takes to upset the balance of the global financial market, if you are the Chairman of the United States Federal Reserve.
Speaking in Massachusetts, Federal Reserve chief Ben Bernanke said economic stimulus was still necessary in the US due to low inflation and high unemployment. According to reports the Australian dollar leapt 2 to 3 cents against the US during and immediately after the speech.
The comments seemed innocuous and relevant mostly to the domestic US, but they were enough to cause financial markets around the world to fall as investors became concerned that increases to interest rates could make borrowing money more expensive.
"Currently we have an unemployment rate of 7.6 per cent, which I think if anything, overstates the health of our labour markets," Bernanke said, “on price stability, inflation is now about 1 per cent, which is below our 2 per cent objective. So both sides of our mandate are saying that we need to be more accommodative."
A near-imperceptible crack in confidence sent markets into a spin around the planet, but was a boon for others. Investors pushed shares to history-making highs for some; The Dow Jones industrial average rose 169 points to close at 15,461 points, topping its previous high of 15,409 on May 28. The Standard & Poor's 500 index gained 22 points to end at 1,675, exceeding its previous high of 1,669 on May 21.