Base Metals Fluctuate Narrowly on Bernanke's Statements

SHANGHAI, Jul. 18 (SMM) – Markets paid close attention to the Federal Reserve (Fed) Chairman Ben Bernanke's semi-annual testimony prepared for the Senate Banking Committee, which hinted that the Fed would take fresh steps to stimulate the economic recovery if necessary. This helped base metals rebound temporarily before fluctuating in a narrow band, but a gradual increase in the bottom end price should bolster future prices.

Fed's Chairman Ben Bernanke said when giving a semi-annual monetary policy report to the Senate Banking Committee Tuesday that, the central bank was still prepared to take further action to boost the economy and help in recover more strongly when needed. Bernanke said the economic activity appears to have decelerated somehow and indicated the economic growth in 2Q was slower than 1Q to a level near 2%. The US economic recovery continues to be negatively affected by loan environment and uncertainty in fiscal policy. Bernanke also pointed out seasonal factors could explain only part of the recent drop in unemployment rate, and said that the Fed would give special attention to whether or not the labor market tends to stagnate and inflation risk is increasing when considering adopting additional easing measures. He held the view non-traditional monetary policy tools still have some ability to support the economy, and if the US economy still cannot improve noticeably, the Fed will implement more easing measures.  

The US Labor Department July 17 released data which revealed that the US CPI for June stayed flat with the previous month as energy costs continued to fall, suggesting that its inflation has been controlled effectively. The US CPI rose by 1.7% YoY in June before seasonally adjustment, higher than 1.6% expected by markets but unchanged from May's 1.7%. The US CPI in June kept flat on a monthly basis after seasonal adjustment and in accordance with market anticipation, but the previous figure fell by 0.3%. The US Core CPI rose by 2.2% YoY in June before seasonally adjustment, lower than the previous data 2.3%. The US Core CPI increased by 0.2% MoM in June after seasonal adjustment, also in line with market expectation and unchanged from the previous data. Lower-than-expected inflation rate serves as positive news for the US economy and allows the Fed more room to implement various kinds of monetary policies.

Current improvements in investor risk appetites have helped underpin base metals, but any upside room will be limited as market worries over the euro zone debt crisis prevail and since China's economy continues to slip.