Bernanke Avoids Gaffes at Debut News Conference, Regrets Rogoff Chess Game

Federal Reserve Chairman Ben S. Bernanke avoided saying anything yesterday at his first press conference that shocked or confused investors. In other words, economists said, his appearance was a success.

During 46 minutes answering questions, Bernanke commented on a broad spectrum of economic issues, saying he expected inflation in fuel costs to slow and the end of the central bank’s $600 billion bond purchase program in June to have little impact on markets. He veered away once from the business at hand to mention his “big mistake” to play chess against economist Kenneth Rogoff, a former professional player.

Bernanke’s success in avoiding a gaffe may help validate the Fed’s decision to open up more to the public after decades in which Fed chairmen limited their appearances largely to speeches and congressional testimony. The Fed has now joined central banks in Europe, Japan and the U.K. in holding regular press briefings.

“From the Fed’s point of view it was beautiful, brilliant,” said William Ford, a former Atlanta Fed president who teaches at Middle Tennessee State University. “He didn’t make any goofs and came away as knowledgeable and smart. It was wonderful PR for him,” Ford said.

Bernanke, 57, said the central bank decided to hold press conferences four times a year after judging that the benefits from providing more information and transparency outweighed the risks of potentially creating “unnecessary volatility in financial markets.”

Economic Projections

The press conference gave the chairman the chance to elaborate on a Federal Open Market Committee statement that was little changed from last month. He also discussed economic projections that were released concurrent with the meeting for the first time, instead of three weeks later.

Traders took Bernanke’s comments, and the FOMC statement released two hours earlier, as a signal the Fed is likely to maintain record monetary stimulus. The Standard & Poor’s 500 Index rose to an almost three-year high, while long-term Treasury yields rose and the dollar tumbled.

The press conference contrasted with Bernanke’s rocky start with the media after he took office in 2006. In April of that year, he told CNBC reporter Maria Bartiromo at a Washington party that markets had misinterpreted his remarks to Congress that had suggested the Fed was finished raising rates. Bonds tumbled when CNBC reported the conversation. Bernanke later said the incident was a “lapse in judgment.”

Bernanke Lampooned

Bernanke was lampooned in December by U.S. comedian Jon Stewart for likening Fed loans in 2009 to “printing money” and then telling CBS Corp.’s “60 Minutes” program in December that the Fed wasn’t printing money by buying $600 billion in Treasury securities.

The Fed chief showed more control of the message yesterday, commenting on how the Fed may maintain stimulus and respond to any increase in inflation expectations. He tried to show compassion for the average American, saying the Fed has pursued record stimulus to help people facing long-term unemployment and that higher gasoline prices are “absolutely creating a great deal of financial hardship for a lot of people.”

Bernanke’s body language betrayed his emotions and conveyed “hopelessness” over long-term unemployment, said Greg Hartley, a former U.S. Army interrogator and author of “The Body Language Handbook.” Bernanke also showed emotion when discussing Japan’s response to its March earthquake and nuclear disaster, Hartley said.

‘Natural Human Reaction’

“That’s a natural human reaction,” Hartley said on Bloomberg Television’s “Taking Stock” with Pimm Fox. “He got more comfortable as time went, and I think the next time we’ll see a more polished person, but he could use some coaching.”

Bernanke appeared at precisely 2:15 p.m., striding into a conference room at the central bank’s Martin Building, across the street and reachable via tunnel from the Eccles Building headquarters where he chaired the FOMC meeting.

The former Princeton University professor took a seat, to the clatter of camera shutters, at a mahogany desk on a platform in front of about 60 reporters seated classroom-style in five rows of tables. For 11 minutes, or almost one-fourth of the allotted time, Bernanke read a statement discussing the FOMC’s actions and its forecasts.

Michelle Smith, Bernanke’s chief spokeswoman, stood off camera selecting reporters for questions. Bernanke didn’t hesitate after a reporter suggested that the Fed has been “unsuccessful” in supporting the dollar. He said investors flocked to the dollar as a safe haven during the financial crisis, and its drop over the last couple of years reflects reduced “uncertainty.”

Reinhart, Rogoff Book

The final question, about a book on the history of financial crises by Carmen Reinhart and Rogoff stoked Bernanke’s memory about Rogoff, a graduate school classmate of Bernanke’s at Massachusetts Institute of Technology in the late 1970s who is now at Harvard University.

“I’ve known him for a long time,” Bernanke said. “I even played chess against him, which was a big mistake.”

Charles Lieberman, former head of monetary analysis at the New York Fed, said Bernanke parried well questions that put him in a “no-win situation.”

“He refused to answer hypothetical questions or get distracted by weak arguments,” said Lieberman, chief investment officer with Advisors Capital Management LLC in Hasbrouck Heights, New Jersey.

The central bank chairman succeeded in “being informative and clarifying and not making a lot of news,” said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago, who has tracked the Fed since 1987.

Rogoff in an interview today declined to comment on his chess game against Bernanke, other than to say Bernanke played as black using an opening strategy known as Petrov’s Defense.

As for the press conference, “I thought he gave, speaking of chess, a masterful performance,” Rogoff said.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net; Steve Matthews in Washington at smatthews@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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