Federal Reserve Chairman Ben S. Bernanke called for maintaining accommodation even as the minutes of policy makers' June meeting showed them debating whether to stop bond buying by the Fed in 2013.

"Highly accommodative monetary policy for the foreseeable future is what's needed in the U.S. economy," Bernanke said yesterday in response to a question after a speech in Cambridge, Massachusetts.

The Fed chairman spoke just three hours after the central bank released minutes of the June 18-19 gathering showing that about half of the 19 participants in the Federal Open Market Committee (TREFTOTL) wanted to halt $85 billion in monthly bond purchases by year end. At the same time, the minutes showed many Fed officials wanted to see more signs employment is improving before backing a trim to bond purchases known as quantitative easing.

The debate underscores Bernanke's challenge in affirming that, even after starting to reduce monthly bond buying, policy makers plan to maintain unprecedented stimulus with a record-high balance sheet and near-zero target interest rate.

"It is clear they want to pull the trigger on the wind-down of QE, but they also want to calm market anxieties about raising rates for the foreseeable future," said Ward McCarthy, chief financial economist at Jefferies Group LLC in New York and a former Richmond Fed economist. Their attempts at providing clarity are further complicated because of "pretty significant divisions among policy makers on a number of issues."

And:

Fed policy makers next meet July 30-31 in Washington. They don't plan to update their economic forecasts, and Bernanke isn't scheduled to hold a press conference until after their Sept. 17-18 meeting. At that gathering, the FOMC will be able to review jobs reports for July and August.

"There's still a clear bias to taper but I think they've taken just a baby step back from the strength of that bias and data will matter from here," said Julia Coronado, chief economist for North America at BNP Paribas SA in New York, and a former Fed economist. "It's not just hiring, it's GDP and inflation that will factor into the equation," she said, referring to gross domestic product.

David Fuller's view Is the Fed Chairman overcompensating for what he probably saw as an overreaction to his mild tapering comments on May 22nd?

You decide but we know that he is not under any immediate pressure to taper from US inflation reports, or modest GDP recovery, or even the latest employment data which showed temporary and lower paid jobs replacing higher paid workers.

We are in a choppy market environment and most US indices are testing or even exceeding their May highs following a strong recovery rally in less than three weeks, as you can see from these daily charts for the Dow, S&P 500, Nasdaq-100, Transports and Russell 2000. Utilities continue to lag but are also in a recovery phase.

Fullermoney has long maintained that the trend for monetary policy is by far the most important fundamental influence on stock markets. Mr Bernanke has reconfirmed that quantitative easing (QE) remains a significant tailwind, and given his current influence, many other stock markets around the world are rebounding as well.

However, Wall Street is overbought once again and back in a region of prior and / or potential resistance. Valuations are no longer cheap and the QE tapering debate will return, probably well before the Fed's next meeting in September. The recent market volatility is likely to continue.