After the Federal Open Market Committee meeting last month, the financial markets "freaked out," according to David Wessel, economics editor of The Wall Street Journal.
Federal Reserve Chairman Ben Bernanke's remarks at the time sent a shockwave through the markets when he suggested the Fed's stimulus could end.
Wessel tells Morning Edition host Renee Montagne that "Bernanke tried to explain that if, and only if, the economy kept improving, the Fed would begin later this year to reduce the amount of money it's pumping into the economy later this year."
The markets interpreted Bernanke's comments to mean interest rates would increase, which prompted a sell-off in bonds and stocks.
The Fed is buying $85 billion in bonds a month to help keep borrowing low. That economic move has encouraged borrowing and spending.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told an audience in Marietta, Ga., last month that what the Fed was trying to do for the economy was similar to how a smoker who wants to quit begins using a nicotine patch.
The markets, however, took it to mean the Fed was going to quit "cold turkey," Lockhart said.
"It took speeches by half a dozen other Fed officials and about a dozen other metaphors to clarify Bernanke's clarification," Wessel says.
Stocks have largely recovered since Bernanke made his stimulus comments, but there has been a surge in long-term interest rates.
The benchmark, 10-year Treasury rate "has gone from below 1.7 percent at the beginning of May to nearly 2.7 percent this week," Wessel says. And in the latest Freddie Mac survey, mortgage rates have gone from about 3.4 percent to 4.3 percent.
"The market is pushing up interest rates because the incoming news on the U.S. economy has been encouraging and in part because markets are anticipating the day when the Federal Reserve won't be trying so hard to keep rates down," he adds.
There could be further clarification of the Fed's plans at 2 p.m. Wednesday with the release of the minutes from the June meeting.
And there's always the chance the markets could get agitated again when Bernanke speaks about two hours later at a conference in Cambridge, Mass. He is expected to talk about the central bank's track record throughout its 100-year history.