With Business Confidence High and a Teflon Market, What's The Fed's Next Move?

The Dow Jones Industrial Average kicked off a new quarter by touching the highest point since the summer of 2008.

A strengthening job market has private payrolls and business confidence surging ... and layoffs waning. 

Large corporations, which have been sitting on record troves of cash, could be poised to start hiring again. Fifty-two percent of top CEOs said they plan to increase hiring the next six months, according to the Business Roundtable's first-quarter survey. That's up from 45% in the fourth quarter and the highest in the survey's eight-year history. 

Results like this imply that corporations are more optimistic and likely to expand.

Does That Mean the Fed Has Met Its Mandate?

* St. Louis Fed President James Bullard said “the economy is looking pretty good” and that the Fed should “see if we want to decide to finish the program or to stop a little bit short.”

Bullard added that “it may be reasonable to send a signal to markets that we’re going to start withdrawing our stimulus, and I’d start by pulling up a little bit short on the QE2 program … We can’t be as accommodative as we are today for too long, we’ll create a lot of inflation if we do that.”

* Dallas Fed President Richard Fisher went even further, telling a European audience that “We’ve done enough” and “we’re at risk of doing too much.” Fisher even went so far as to say the Fed’s dual mandate of controlling inflation and boosting employment should be changed. He wants the Fed to have no responsibility for employment, and to focus solely on inflation.

* Fed Chair Ben Bernanke has the potential to be even more market moving this month, at the April 26-27 Federal Open Market Committee meeting. Not only will this be the first meeting after these more hawkish remarks, but it will also be the first time the Fed holds a post-meeting press conference.

Yes, you read that right … Rather than hide behind prepackaged statements, Ben Bernanke will stand in front of the microphone and explain the Fed’s actions. He’s going to do that several times a year going forward — with this year’s briefings scheduled for April 27, June 22, and November 2.

If Bernanke shows any shift in policy, we could see some real market fireworks.  Just something to watch for.

Related articles

• Fed's Bullard: No consensus on cutting short QE2 (reuters.com)
• Why the U.S. dollar goes up - or down (theglobeandmail.com)
• Discord At The Fed Has Bernanke Out On A Limb (businessinsider.com)
• Investors look to Fed minutes for clues (theglobeandmail.com)