Bernanke set to Pause

In his congressional testimony today, Bernanke provided a laundry list of reasons to pause the the Fed's interest rate hikes. (From Bloomberg)

Buoyed by ``strong'' global growth, ``the U.S. economy seems poised to grow in coming quarters at a pace roughly in line with the expansion of its underlying productive capacity,'' Bernanke said.

``The anticipated moderation in economic growth now seems to be under way, although the recent erratic growth pattern complicates this assessment,'' he said. ``That moderation appears most evident in the household sector.''

He further tempered his remarks, based on the higher than expected inflation figures: "The recent rise in inflation is of concern.''

Overall, he has set himself up to hold the nominal interest rate steady. As I noted in a previous post, I would add another 1/4 point hike, based largely on the small real interest rate, and the fact that higher energy prices are just now working their way into core inflation. But, Ben has a little more experience than me on this one, so I will defer to his better judgement.

For my friends abroad: be prepared for a weaker dollar following this testimony and then again if he does hold rates steady in August.