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Why markets are obsessed with Bernanke and Draghi?


Why markets are obsessed with Bernanke and Draghi?
Global investors these days, care little what governments say and do. Their prime concern is what central bankers would say and do to stimulate economies. Almost every single report from broking and investments houses, must mention Federal Reserve Chairman, Ben Bernanke or European Central Bank President, Mario Draghi, without which the report stands incomplete.

Why it's all about Ben and Draghi these days?


Ben Bernanke has to take a decision on quantitative easing (QE3), a mechanism in which the central banks buy government securities, and thus unleashes fresh money into the system. This quantitative easing is resorted when economic growth rates are sagging and unemployment is at a low. QE, as it is often referred to releases fresh money, which leads to money finding its way into stocks and other commodities, including metals and crude oil. And, foreign money also funds its way into Indian markets.

In fact, foreign investors have so far invested as much as Rs 60,000 crores in the Indian markets. This fuels a stock market rally across the globe, something which every investor wants. It's a different matter, that such measures can also fuel inflation in the medium term. But, investors do not care about inflation, they just want a rally across global and commodity markets.

Now there is a Federal Reserve meeting on September 12-13 and markets are hoping for another round of QE announcement from Ben Bernanke. The money through QE3 can once again fuel a rally in commodities and equity markets, as it has done in the past.

As with big Ben in the US, so is it with expectations from Draghi, the European Central Bank President. On September 6, 2012, the ECB meets to decide various options, including monetary measures and a bond buying programme to save the eurozone.


Draghi has been in the limelight for the last several quarters. More recently his statements that the ECB would do everything to save the euro fired the markets in July. Again, the ECB meets on September 6, 2012 and all eyes are again on Dragi, the ECB president. Markets are hoping for a definitive solution, which has so far alluded the eurozone.

What measures Ben Bernanke and Mario Draghi come up with, only time will tell. But, one thing is for sure, unless there is a reversal in the global economic slowdown, Central Bankers like Draghi and Bernanke will remain in the spotlight.

Read more about: ben bernanke mario draghi
Story first published: Wednesday, September 5, 2012, 8:30 [IST]
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