Blankfein Says Market Overreacted to Bernanke’s Tapering Talk

Investors overreacted to Federal Reserve Chairman Ben S. Bernanke’s comments that the central bank could reduce monthly bond purchases, Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd C. Blankfein said.

“The market overreacted,” Blankfein, 58, said today in an interview on CNBC. “The market, of course, took this as ‘Oh my God, it’s the first moment and it was going to be an avalanche.’ And that doesn’t necessarily have to be the case.”

Fed officials have sought to clarify comments by Bernanke that sparked turmoil in global financial markets. Bernanke said on June 19 that the Fed could start curtailing the current $85 billion monthly pace of bond purchases later this year and end them around mid-2014, assuming the economy meets the Fed’s forecasts.

Federal Reserve Bank of New York President William C. Dudley said today the central bank may prolong its asset-purchase program if the economy’s performance fails to meet the Fed’s forecasts. Dudley, 60, Goldman Sachs’s former chief U.S. economist, also said an increase in the benchmark interest rate is “very likely to be a long way off.”

Concerns the Fed may curtail accommodation helped push the yield on the 10-year Treasury note as high as 2.61 percent this week from as low as 1.63 percent in May. The average rate for a 30-year fixed mortgage rose to 4.46 percent from 3.93 percent, the biggest one-week increase since 1987, McLean, Virginia-based Freddie Mac said in a statement.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christine Harper at charper@bloomberg.net

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