At US Fed Reserve, uncertainty rules on future course of policy & leadership

The US Federal Reserve chairman, Ben Bernanke, faces the increasingly difficult challenge of shaping investor expectations about the future course of Fed policy amid growing signs that the Bernanke era at the central bank is drawing to a close.

US President Barack Obama suggested late on Monday that he was likely to nominate a new Fed chairman this year, saying that Bernanke had "already stayed a lot longer than he wanted or he was supposed to". Obama added that Bernanke, whose second four-year term in office ends in January, has done an "outstanding job".

The comments bounced around Washington on Tuesday even as Bernanke convened a regularly scheduled meeting of the Fed's policymaking committee to debate how much longer the Fed will continue its current efforts to stimulate the economy. Investors are watching for signs that the Fed is considering scaling back later this year.

The central bank is buying $85 billion a month in mortgage-backed securities and Treasury securities, in addition to holding short-term interest rates near zero. Both measures are intended to encourage job creation by easing financial conditions, and the Fed pledged to press the campaign until it saw "sustained improvement" in the outlook for the labour market.

But that message has been muddled recently by conflicting pronouncements about the duration of the asset purchases from several of the 19 Fed officials who help make policy. Bernanke contributed to the confusion by telling Congress last month that the Fed might begin to reduce the pace of its purchases this year — but might not — while avoiding any clear account of how the central bank would make such a decision.

Uncertainty about the Fed's plans and its leadership has focused attention on the news conference that Bernanke plans to hold after the Federal Open Market Committee releases a policy statement. The Fed also will release economic projections by the 19 officials, which could help to explain the apparent momentum toward doing less by showing how quickly they expect the economy to grow and unemployment to decline.

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