Federal Reserve Chairman Ben Bernanke is up on the Hill later today and is likely to shed some light on what the Fed plans to do in terms of unwinding its own overly complex and toxic balance sheet.
"Bernanke needs to explain that the Fed has the tools to do the job and that it intends to use them forcefully when it has to," said Lyle Gramley, senior economic adviser with New York-based Soleil Securities Corp. and a former central bank governor. "That would help hold down inflation expectations and give the Fed the opportunity to stay easier for longer."
House Financial Services Committee Chairman Barney Frank said he expects Bernanke to spell out how the Fed will end its unprecedented expansion of credit when he testifies before the Massachusetts Democrat’s panel tomorrow. "I’ve urged him to be ready to tell people how he’s prepared to unwind some of those facilities when it’s prudent to do so," Frank said. Bernanke is "very conscious" of worries that the Fed may end up rekindling inflation, the lawmaker said.