By Tim Ahmann and Mark Felsenthal
1 hour, 25 minutes ago
WASHINGTON (Reuters) - Fledgling Federal Reserve Chairman Ben Bernanke may have a hard time recouping his credibility after off-the-cuff remarks over the weekend made it onto the airwaves on Monday, roiling financial markets.
CNBC anchor Maria Bartiromo waited until late afternoon Monday to report that Bernanke had told her at a journalists' dinner on Saturday that traders had misread his congressional testimony last week.
"Federal Reserve Chairman Bernanke told me over the weekend that the media and the markets basically got it wrong last week in speculating that the Fed is done raising interest rates," she said moments before a live interview with Chicago Fed President Michael Moskow.
"Bernanke also told me it is worrisome to him that anyone would think of him as dovish, though that feeling did permeate last week," she added.
As Bartiromo, speaking from the Chicago Mercantile Exchange, turned to interview Moskow, the pit exploded into activity, with traders screaming orders in the background.
Her report knocked down prices for U.S. stocks and government bonds, while driving the dollar higher as traders saw them as suggesting more interest-rates rises ahead than they had expected after the testimony.
While some did not see his comments as markedly different from his remarks on Capitol Hill, other market participants were dumbstruck that the head of the world's mightiest central bank would seemingly try to tweak his message with a brief aside at a social event, and cast it as a rookie mistake.
"First of all, the idea that the chairman of the U.S. Federal Reserve is disseminating policy via network reporters at off-hours dinner parties is absurd," said Steen Jakobsen, chief investment officer at Saxo Bank in Copenhagen.
"Frankly, I think it hurts the Fed ... and Bernanke has lost serious credibility," he added.
"IGNOBLE RETREAT?"
Alan Ruskin, head of strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut, said the remarks looked like an "ignoble retreat" from Bernanke's testimony to Congress on Thursday, when he said the Fed may consider pausing in its 22-month campaign to push interest rates higher to assess incoming data.
"It comes off as a great example of over-communication and a possible attempt to over fine-tune, assuming he was willing to go on the record with these comments," Ruskin said.
Not everyone, however, was willing to make that assumption.
"This criticism implies the action was a deliberate part of the Fed's communication to the markets, but to us it looks very likely this was inadvertent," Washington-based Tom Gallagher of investment advisory firm ISI Group told clients.
"His clarification seems to have been delivered informally in a conversation at ... a forum where ground rules are pretty ambiguous," he said in a note, adding that Bernanke was likely surprised to see his remarks reported.
The comments came during a social aside at the annual black-tie White House Correspondents Association dinner, where hundreds of reporters mingle with sources in government, along with sports and entertainment celebrities.
Journalists see the dinner, which features a speech by the president, as a chance to cement or establish bonds with people they cover, said Martha Kumar, a political science professor at Towson University in Towson, Maryland.
"The tacit understanding that most people go on is that it's a social occasion, and you're not bringing them there to put them under the microscope," she said. "For that, you don't want to hold them to on-the-record statements."
FAIR GAME
Still, there is no rule that says guests' remarks at the dinner are off limits, past presidents and board members of the correspondents' group said.
"I don't think there's any specific policy regarding conversations," said the Associated Press's Mark Smith, who led the association over the past year. "If a dinner guest wishes to say something off the record, that's up to him or her to make clear ahead of time."
Kumar said Bernanke should have been aware his remarks could circulate more widely.
A spokeswoman for the Fed declined to comment.
CNBC spokesman Kevin Goldman said Bartiromo and an executive from Wall Street firm Goldman Sachs were escorted by a Wall Street Journal reporter to a Journal-hosted table where Bernanke was sitting.
CNBC's Goldman said the investment firm executive asked Bernanke a question, which he declined to answer. Bartiromo then asked a question and this time Bernanke responded.
"CNBC respects all off-the-record conversation, of course, and this was not off the record," Goldman said. Asked why the report had appeared so late in the day, he noted that CNBC does not broadcast on the weekend and that Bartiromo knew no one else had the story.
"We're fine with the way this story broke," he said.
(Additional reporting by Nick Olivari, Emily Chasen, and Jamie McGeever)