Magnifying glass, calculator, and pen
Markets

Yellen Q&A: I feel confident about US economic fundamentals

Yellen continues to take questions from reporters:

On high yield:

  • I don't see anything to suggest a negative outcome for the US
  • We want to eventually operate with a much smaller balance sheet
  • Fed studying long-run framework for balance sheet

  • Spreads in high yield have been widening since 2014, partly due to oil
  • Third Avenue was an unusual fund

On hike:

  • We are starting early and gradually because we don't want to cause a recession
  • We have considered the risk of moving too early
  • Abrupt tightening is the usual reason central banks cause recessions
  • This decision reflects our confidence in the US economy
  • Longer term rates unlikely to move very much

On persistent 'transitory' inflation

  • If we conclude structural factors are holding down inflation, we would take action
  • We would need to see a sustained departure from 2% inflation goal
  • Fed looks at range of inflation statistics

On the upside economic risks:

  • US consumers are in healthier conditions
  • Demographics point to considerable upside in housing and residential investment
  • Recent growth in emerging markets have strengthened

On path of rates:

  • Strongly doubt there will be evenly spaced rate hikes
  • We will be data dependent
  • Main reason we lowered our PCE forecast was stronger dollar
  • I don't see interpretation of inflation and models as having fundamentally changed
  • All forecasting models are "not perfect"

Wages:

  • We may be seeing some insipient signs of wage growth
  • I hate to say it's a firm trend, we've been disappointed in the past

So far, there have been no strong headlines in the press conference. Yellen is a master of speaking endlessly without saying anything meaningful.

Ok, that's all she wrote from the Fed for 2015.

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.

Other Topics

ForEx

Latest Markets Videos