Stocks Like Bernanke Banter

Whatever traders make of Bernanke, little was actually new in his testimony.

"What I saw today was that the Fed doesn't have a message here," says Ethan Harris, chief economist at Lehman Brothers. "We're on hold."

Bernanke did include more than his usual commentary on energy prices, notes Harris. Giving credit where credit is due, the chairman acknowledged that oil prices cooperated through the second half of 2006 to help reduce inflation and spur consumer spending. He also revealed that he believes energy prices "will probably help foster a continued edging down of core inflation."

He added: "In particular, futures quotes imply that oil prices are expected to remain well below last year's peak. If actual prices follow the path currently indicated by futures prices, inflation pressures would be reduced further."

By the same token, if oil prices were to spike, the opposite outcome could occur. Bernanke even said, "they [energy prices] remain a key source of uncertainty to the inflation outlook."

Bernanke's comments on energy prices reveal perhaps the biggest weakness in the Fed's forecast. Unpredictable energy markets could upend growth and spark inflation, which might test Ben's attachment to his inflation 'comfort zone,' says Harris.

Bernanke also highlighted the tight labor market as a threat to inflation through rising wages. But, he noted that if productivity keeps up with the pace of employment and compensation, the risk to inflation will be contained.