Mr Bernanke will now decrypt the policy winds of post-crisis times

On 21st local time, Federal Reserve Chairman Ben Bernanke will appear on the House Financial Services Committee as scheduled to receive congressional questioning on semi-annual monetary policy. Analysts believe that in a delicate period when the U.S. economy looks like it has weathered the worst of the crisis but the unemployment rate continues to rise, Mr Bernanke needs to strike a balance when it comes to delivering future policy signals: On the one hand, the authorities need to make clear to investors that the central bank is well prepared for future exit strategies to reassure the market　　　　On the other hand, the Fed has to convince lawmakers and ordinary people that the current loose monetary policy will not soon be reversed to create conditions conducive to economic recovery and job creation. The recovery in credit markets came at a meeting last month 23rd and 24th, when the Fed did not expect to suspend its benchmark interest rate at 0. Then the statement after the meeting basically applied the wording of the previous conference, did not give a clear signal on the future policy direction.　　It has also made the market more hopeful about Bernanke's testimony this week and the semi-annual monetary policy report.　　Mr Markey, chief economist at Barclays Capital New York, said this time Mr Bernanke's face would have been less worried than it had been before, as more and more signs showed that the US recession had passed its worst period. One of the biggest good news for the Fed is the credit market.　　A growing number of "melting ice" signals have recently emerged in the credit markets that have been frozen for a while as a result of the financial crisis.　　Wall Street analysts note that demand for short-term temporary loans from commercial banks and other financial institutions has weakened sharply in recent days, signalling a recovery in credit markets. Public data show that the Fed's credit arrangement, which allows securities companies to swap Treasuries with illiquid collateral, has recently traded at $4 billion trillion, far below the "sky" of $235 billion last October. Meanwhile, in another financing plan for the commercial paper market, the total amount of money borrowed from the Fed by the parties to the Federal Reserve has now fallen to less than One-third of its peak.　　Interest in the agency's involvement in other Fed liquidity plans has also fallen sharply recently, and some plans have not even received funding applications for 10 consecutive weeks.　　In fact, the Fed has pledged to buy up to $1.75 trillion trillion of U.S. Treasury bonds and other bonds, but so far the agency has only about half the amount of real purchases, and credit markets seem to be starting to feel the effects. The result is a "weight loss" of the Fed's own balance sheet.　　During the week ending Wednesday, the Fed's total assets (including all loans and holdings) were $2.06 trillion trillion, below the peak of $2.3 trillion last fall. Bernanke needs to show that the good news for Mr Bernanke comes from the banking system. More than 80% per cent of U.S. banks said that the government's financial bailout funds had spurred their lending growth, suggesting that the bank's reluctance to lend hasgreatly improved. However, given the severity of the crisis, even the most optimistic do not believe that the U.S. economy will soon reproduce strong growth.　　The worst of the current crisis is over, says Roubini, a leading economist, but the recovery is likely to start early next year, and the shape of the recovery may well be in the form of a W-a relapse into recession sometime next year.　　Last week's latest economic forecasts from the Federal Reserve suggest the authorities believe the recession may not be as severe this year as expected, but the Fed also expects the unemployment rate to continue to rise and possibly break the 10% mark during the year. That, analysts say, underscores the dilemma the Fed is now facing: a balance between stabilizing prices and boosting job creation, which Mr Bernanke is to explain to Congress and investors this week.　　Experts said Mr Bernanke could take the opportunity to clarify how the authorities would "exit" with a very low interest rate after an unprecedented monetary expansion.　　Poole, who once served as president of the Federal Reserve's Saint Louis division, said he personally believes the authorities should initiate a reversal of monetary policy in due course, but the Fed does not yet want to raise concerns about a tightening of policy. "This means that the Fed needs to make it clearer to the outside world how to know, or what indicators to judge, the right time to start tightening," he said.　　"said Poole. Employment inflation is in the hands of the financial markets, and inflation expectations are on the rise. The federal funds rate futures show that the market thinks the Fed is likely to raise interest rates by more than 50% by January next year. Economists predict that the Federal Reserve will start raising interest rates in the third quarter of next year, with a return to 1% next year, according to the Bloomberg survey.　　It also shows how the Fed now faces the problem of recovering excess liquidity after a raft of unconventional policy measures. Wrightson ICAP analyst Krandal that, in terms of absorbing liquidity, the Fed could then take the form of taking deposits from commercial banks, leading banks to deposit their money in the Fed rather than lending indefinitely.　　Poole also said that while the Fed wants credit markets to recover, it does not want to see banks rush to borrow cheap money from them because it could lead to inflation, so the authorities would prefer to take a bank deposit and pay interest.　　Frank, the Chairman of the House Financial Services Committee, said he had told Bernanke to explain the "exit strategy" at the hearings to allay fears that low interest rates could trigger inflation. On the other hand, Mr Bernanke cannot be too far behind to let markets feel that the authorities will soon reverse monetary policy operations to avoid a recovery in the economy and the job market.　　Jetler, a professor of economics at New York University, said Mr Bernanke had to emphasise that he would keep interest rates low for the foreseeable future, would not implement the exit strategy prematurely and show his determination to maintain loose monetary policy. Although unemployment is a lagging economic indicator, analysts say the country will face a big re-election next yearIt would be most important to remove voters ' worries about losing their jobs, so they would also put pressure on Mr Bernanke.