Treasury Bulls Battle Bernanke's Hawks

"The Fed is super-glued to its seat," says Ethan Harris, chief economist at Lehman Brothers. "Their consistent message is that they're on hold for a long time, and if anything, they may be hiking."

Indeed, just about every Fed speaker in recent weeks, including Bernanke on Tuesday, remind the market that the bias is toward hiking the fed funds rate, not easing.

St. Louis Fed President William Poole, now a voting member of on the FOMC, said Tuesday in an interview with Market News International that U.S. policy is mildly restrictive, but that slower growth is not sufficient for the Fed to consider easing policy.

Any Fed easing "is going to depend entirely on what's happening to the inflation rate," Poole said in the interview. "I know I would find it very difficult myself to vote to decrease the federal funds rate if it appeared that the inflation rate is hanging at its current level or is headed higher."

Philadelphia Fed President Charles Plosser also highlighted inflation as a significant problem in a speech Tuesday at the University of Rochester's Simon Graduate School of Business. "There remains some risk that policy is not yet firm enough to ensure a return to price stability over a reasonable time horizon," he said. Plosser acknowledged that inflation readings have "looked more encouraging, but we should not read too much into these figures." Plosser believes that GDP growth will accelerate to 3% next year, he said.