Markets

Yellen Q&A: Brexit was certainly a factor in FOMC decision

Yellen answers questions in the post-statement press conference (live updates)

She said the words 'new normal' for the first time but what exactly the New Normal means is up for debate.

  • Brexit could have consequences for global markets
  • Brexit would impact would economy and financial conditions
  • We expected post-financial crisis headwinds to dissipate but other factors may be in play
  • Productivity may stay low
  • All of the dots are highly uncertain

  • Fed forecasts suggest healthy growth for the rest of the year
  • There has been a loss of momentum in labor market but it's still healthy
  • Good deal of incoming data indicates progress but it bears watching

Translation: "Don't overreact to the jobs report, but we're going to overreact to it"

  • Clearly the market expects Fed rates to remain low over the next 10 years
  • We clearly will be looking at the next jobs report
  • We will want to see an adequate pace of jobs creation, there might be revisions
  • There is no formula for what it will take to hike but we'll be watching jobs closely

Asked about why she left out rate hikes in the coming months

"We need to make sure there is sufficient momentum... I'm not comfortable to say it's in the next meeting or two ... but it's not impossible ... every meeting is live."

  • Core inflation is behaving as one would expect
  • Thinks evidence supports inflation moving up towards 2%
  • Actual inflation behaving more or less as expected
  • Minutes are an accurate depiction of the meetings, have to be
  • Minutes are not corrected 'after the fact'
  • There was a lot of discussion about June hike at April meeting

Yellen on helicopter money

  • We've seen episodes in history of hyper inflation due to monetary financing
  • Fiscal policy can play an important role. You'd hope they weren't at cross purposes
  • In extreme circumstances, fiscal and monetary policy can be coordinated

On dollar/global outlook

  • State of foreign economies are factors that influence US outlook
  • Fed does look at foreign rates and other economies in setting policy
  • Central bank divergence does tend to spill over into FX rates
  • Increases in the dollar have served to push inflation down
  • I wouldn't say a stronger dollar is a constraint on monetary policy
  • Oil drop has been a boon for US households
  • Oil drop has hurt economies of trading partners

And that's all she wrote.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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