Bernanke Hints at QE3, but Nothing Imminent

The line between soaring and plummeting stocks is very thin. Sometimes it comes down to tone and word choice.

Federal Reserve Chief Ben Bernanke seems to have struck the right tone in his much-anticipated Jackson Hole speech this morning. Bernanke did not mention quantitative easing – which many investors have been clamoring for – by name. But he did hint at it.

Here’s exactly what he said:

“Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."

WILL provide additional policy accommodation AS NEEDED.

Those were the words that likely convinced investors that the waters were safe, as stocks climbed more than 0.8% in early trading.

Few expected that Bernanke and the Fed would actually announce a third round of quantitative easing today. So the mere mention of any stimulus measures was enough to assuage a few investors who have been skittish about a sluggish U.S. economy.

 Or at least it was enough to assuage them for one day.

Still, today’s move only makes up for yesterday’s drop. Stocks fell 0.78% on Thursday. So today’s gains may be little more than a one-day correction – a sigh of relief that Bernanke didn’t completely rule out QE3.