Thursday, October 05, 2006

Bernanke talks, markets listen

Federal Reserve Chairman Ben Bernanke gave a speech yesterday. "I think that I would estimate that slowing housing construction will probably take about a percentage point off of growth in the second half of this year and probably something going into next year as well," the Fed chairman told the Economics Club of Washington. Bernanke noted other parts of the economy remain strong, including nonresidential construction. The Chairman also said he believes inflation will cool over time, even though recent data has indicated that consumer inflation (excluding food and energy) are still running hotter than the Fed's preferred range of 1% to 2% year-over-year growth. Investors interpreted the speech as a sign that an interest rate cut could be possible soon, and the stock market rallied.

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