Bernanke admits a 'lapse'
Fed Chairman says he should not have made comments that riled markets to television reporter at White House dinner.
NEW YORK (CNNMoney.com) - Federal Reserve Chairman Ben Bernanke admitted Tuesday to Congress that he made a mistake talking to a television reporter about market perception of his inflation-fighting credentials.
Bernanke appeared before the Senate Banking Committee to talk about the relatively non-controversial topic of the need for financial literacy in the American public.
While most of the questions from senators focused on that topic, Sen. Jim Bunning, R-Ky., a critic of the chairman, questioned him about his comments to a television reporter at the White House Correspondents' Association dinner April 29.
"I warned you to be careful about what you say because people would follow what you said very closely," Bunning said. Markets fell after Bernanke's comments were reported the following Monday.
After Bunning asked him if he learned anything from the experience, Bernanke said: "That episode was a lapse of judgment on my part." And he said future communication with the markets will be through established channels and testimony.
Bernanke last appeared before Congress April 27, and during his testimony he said that the Fed might pause at some point in its course of regular interest rate hikes in order to weigh the impact of past rate hikes on the economy.
The comment was taken by investors to mean that the Fed might be close to the end of its policy of rate hikes, and stocks soared, hitting what was then a fresh six-year high.
But on May 1, the Monday afternoon after the dinner, CNBC anchor Maria Bartiromo reported that she had asked him, "Mr. Bernanke, did the markets and the media get it right last week in terms of its reaction to your Congressional testimony?"
And she reported that he responded "No. It's worrisome that people would look at me as dovish and not necessarily an aggressive inflation fighter."
Her report sent both stocks and bonds sharply lower that day on concerns that the Fed would raise rates higher than market expectations. It also brought criticism of Bernanke from some Fed watchers. The Fed didn't comment on the report at that time.
In response to Bunning asking him if he felt the Fed was responsible for the recent decline in U.S. stocks, Bernanke said there were a number of factors that could be weighing on markets, including perception of slower global economic growth and a higher risk of inflation.
"I don't want to make a judgment about why stock market is doing what it's doing," he said.
As to the future of interest rates, he repeated past statements that economic readings ahead of future meetings would determine whether there will be further rate hikes.
"We indicated our thinking would be very data dependent. We'll be watching that data very carefully," he said.
Critics on Bernanke's comments to TV reporter. More here.
For a look at our "Eyes on the Fed" special report, click here.