The focus of attention for markets yesterday was Federal Reserve Chairman Ben Bernanke's testimony to Congress. From Reuters:
Federal Reserve Chairman Ben Bernanke on Thursday said for the first time the central bank could at some point pause its 22-month interest-rate raising campaign to allow time to divine the economy's path.
Bernanke told Congress the economy was poised to slow and said the Fed's policy panel may opt for a hiatus even if inflation risks were elevated, leading financial markets to cut bets on a June rate rise while still wagering on one in May.
"Even if in the committee's judgment the risks to its objectives are not entirely balanced, at some point in the future, the committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook," Bernanke said in testimony before the Joint Economic Committee.
"Of course, a decision to take no action at a particular meeting does not preclude actions at subsequent meetings," he added, signaling a willingness to reembark on the rate-hike course if inflation risks do not abate.
However, China's interest rate move yesterday also shook markets.
China raised interest rates for the first time in 18 months on Thursday, sending ripples through surprised world markets who saw the move as an attempt to prevent the emerging economic powerhouse from overheating.
The People's Bank of China raised one-year lending rates to 5.85 percent from 5.58 percent, prompting sky-high world oil and commodity prices and some stock markets to retreat.
In employment-related news, the US Labor Department reported yesterday that first-time claims for state unemployment insurance benefits rose by a larger-than-expected 11,000 last week to 315,000, but in Germany, the Federal Labor Agency reported that unemployment fell by 40,000 to 4.69 million and the adjusted jobless rate fell to 11.3 percent from 11.4 percent.