''Perfect storm'' on horizon as confidence in paper money breaks, Embry says

Section:

Market Uproar Follows Fed 'Misunderstanding'

By Jennifer Hughes
Associated Press
Monday, May 1, 2006

http://news.yahoo.com/s/ft/20060501/bs_ft/fto050120061904346375

Stocks fell on Monday after CNBC's Maria Bartiromo revealed on air
that Ben Bernanke felt his testimony last week had
been "misunderstood."

The anchor said Mr Bernanke had told her at the White House
Correspondents' dinner in Washington on Saturday that he had not
intended the markets to infer that the Fed was nearly done raising
interest rates.

"I asked him whether the markets got it right after his
congressional testimony and he said, flatly, no," Ms Bartiromo said.
She was reporting live from floor of the Chicago Mercantile Exchange
and the resulting trading roar almost drowned out the rest of her
remarks.

She added: "He said he and his Federal Open Market Committee members
were basically trying to create some flexibility for the Federal
Reserve, saying the Fed may pause but the data will really dictate
whether more rate hikes will occur."

The S&P 500 fell 0.7 per cent and the Nasdaq Composite lost almost
0.9 per cent. Stocks had rallied on Mr Bernanke's testimony last
week, which was interpreted as signalling a probable pause in the
Fed's series of rate rises after its May meeting.

"It comes off as a great example of over-communication and a
possible attempt to over-fine-tune, assuming he was willing to go on
the record with these comments - CNBC is not the Fed's obvious port
of call to correct market expectations," said Alan Ruskin,
strategist at RBS Greenwich Capital.

The Fed declined to comment.

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