What exactly did he mean by that? A full trading day after Wednesday’s bulletin and press conference from the Federal Reserve, two things were evident. First, the remarks by Ben Bernanke came as a real surprise.
Second, the tightening of monetary policy after four years of unprecedented lenience is under way. Ten-year Treasury bond yields, bedrock of the global financial system, have touched 2.4 per cent, up a full percentage point from their low almost a year ago. That is a significant tightening, engineered by the Fed.
Why such a surprise? Look at inflation. An expert on Japan, Mr Bernanke is famously worried that deflation could endanger the economy. Yet he has driven long-term rates up at a point when US inflation is falling, as are inflation expectations, while China’s slowdown is pushing down commodity prices. This points towards easing, rather than talking the market into raising rates.