FED BOSS' PLAN WORKED; WHAT HAPPENS AFTER?

Washington, March 1 (AP)- During a speech in Jackson Hole, Wyo., on Aug. 27, Bernanke outlined an effort to spur economic growth, prevent prices from falling and push markets higher through the purchase of government bonds. Since then stocks have soared, the unemployment rate has dropped and Americans have started to spend more.

"It's been a success," says Bill Gross, who manages the world's largest mutual fund at Pimco. Gross had skewered Bernanke's attempt to boost the economy, comparing it to a Ponzi scheme. "It's hard to dispute that since Jackson Hole the market is up around 25 percent”.

But the Fed's $600 billion program to buy Treasurys ends in June. And investors like Gross are worried the stock and bond markets will fall without the Fed's $75 billion monthly injection. "At the end of June, the biggest bond buyer steps away," he says. "The markets could have a shock in store”.

And now there's a different economic issue. Higher prices for food and energy have replaced a double-dip recession as the major concern for economists and investors. Bernanke begins two days of Congressional testimony Tuesday and is sure to face criticism that the bond-buying program known as quantitative easing is to blame.

On the surface, Bernanke's speech in Jackson Hole was full of Fed-speak. But the language was clear to those in the audience at the Fed's annual Board of Governors meeting in the Wyoming resort. "He was saying, 'Whatever it takes we're going to do,'" says Richard Hoey, chief economist at BNY Mellon. "It was a Rambo message”.

The move, which began in November, was unorthodox, but the logic was simple: Buying $600 billion in Treasurys would make borrowing cheaper and move investors out of low-yielding bonds into riskier investments like stocks. A rising stock market could then give Americans confidence in the economy and spur consumer spending, which leads to higher corporate profits.

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