Bernanke and Trichet Deliver Addresses at Frankfurt Central Banking Conference

ForexNewsNow | Published on November 19, 2010 at 12:26 pm

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european central bank jean claude trichet forexNEW YORK (Forex News Now) – In global forex trading news today, two of the world’s most important financial dignitaries – Federal Reserve Chairman Ben Bernanke and European Central Bank President Jean-Claude Trichet – delivered speeches addressing various issues pertaining to the global economy and its recovery.

Bernanke’s speech came at a central banking conference held in Frankfurt, Germany, and primarily focused on defending the controversial and oft-debated $600 billion stimulus purchase program announced by the Federal Reserve earlier this month.

In the address, Bernanke pointed to high unemployment and sluggish investing as reasons why the purchase program was necessary.  He also pointed to history as support, stating that previous asset purchases – most notably during the 2008 financial crisis – “appear to have been quite successful in helping to stabilize the economy and support the recovery during that period.”

Bernanke then stated that the Federal Reserve’s latest action is on a firm foundation constructed on conventional monetary policy.

“Even the asset purchases, the quantitative easing, done by the British, the Americans, the Japanese, has some pretty classic roots to it.”

This was largely in response to charges that the United States is devaluing the dollar much in the same way that China is devaluing the yuan – which smacks of hypocrisy, according to some critics, especially considering the fact that the U.S. has criticized China routinely for its policies.

Bernanke also covered the disparities in the currency market trading environment, citing a “two-speed nature” of the global recovery marked by rapid recovery in emerging markets but sluggish recovery in developed ones.
This “bifurcated” recovery, according to Bernanke, has had worrying results, namely that the “sense of common purpose has waned” versus where it was two years ago.

In other global forex trading news, the ECB President, Jean-Claude Trichet, delivered a keynote address at the same conference, stating that “a very ambitious reform of euro area governance” was needed in order to prevent the issues that resulted in the crisis.

He did report good news for the EU, citing a 12-year track record of successfully maintaining a favorable rate of inflation below the 2% goal. He further predicted that the inflation rate would continue to remain stable for the time being.

The highlight of his speech was focused on the new European Systemic Risk Board, a body designed to monitor systemic risk in the European economic system.  It will work closely with the Financial Stability Oversight Council in the U.S. to deliver warnings and recommendations backed by authority that “will draw on the quality of its analysis and its deep understanding of the functioning of the financial sector.”

Two takeaways from the speeches: The quantitative easing program announced by the Fed will not go away as some have predicted.  Furthermore, the economic outlook for the euro zone, judging by the optimistic tone of Trichet’s address, is favorable.

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