The Fed's 360 degree door

Today's testimony by Fed Chief Ben Bernanke, as well as the minutes from the latest Fed meeting released later in the day, gave central bankers a door to pursue any number of policy options.

Let me explain. Early today, Bernanke testified before a Congressional committee that a premature tightening of monetary policy would carry substantial risks.

Got it. The Fed won't be paring back on bond purchases anytime soon.

Then, during the Q&A session, Bernanke said the Fed could reduce QE in the next few meetings, but added that it all depends on the data. Hmmm.

Muddy minutes
To make matters even more interesting, the Fed's minutes included this statement.

"A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome."

But the minutes also referred in a number of instances to "downside risks."

So Bernanke is warning against a premature tightening, but a number of participants are expressing a willingness to cut back on bond buys, possibly by June.

Confused? The Fed sure seems divided. Or maybe it just doesn't want to clearly communicate when it might be start to taper off as it is worried the Street would quickly price in any exit.

Bottom line - the Fed has shifted the gravity of its position towards tapering off, but it has kept the door open to any number of policy responses if conditions warrant. It's a policy for all seasons.