Yellen’s semi-annual statement to the Congress seemed to have initially come off more Dovish than expected with an initial fall of the Dollar and Bond yields and a rise in Futures and Stock Indices.
In her prepared written statement, some initial key points jumped out:
“additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion and return inflation to our 2 percent goal”
“At present, I see roughly equal odds that the U.S. economy’s performance will be somewhat stronger or somewhat less strong than we currently project.”
Janet Yellen’s statement doesn’t seem to be different from her previous stance, and this testimony by the Head of the Federal Reserve is conducted over 2-days.
She also mentioned the Balance Sheet of the Fed:
“Last month the FOMC augmented its Policy Normalization Principles and Plans by providing additional details on the process that we will follow in normalizing the size of our balance sheet.”
“Finally, the Committee affirmed in June that changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy. In other words, we do not intend to use the balance sheet as an active tool for monetary policy in normal times.”
During her Q&A session in Congress, some interesting points Yellen made were:
“American firms been sitting ona lot of cash for years”
“Fed Balance sheet plan aimed at avoiding market disruption”
“US debt trend to lead to unsustainable debt situation ”
“Unemployment running below what we consider sustainable”
Yellen also stated the Federal Reserve intends to return to Treasury-only portfoilio (getting rid of mortgage-backed securities).
If you are trading any US currency pairs, Stock or other assets, be on the lookout for large swings in price. The Dollar has moved up slightly from the daily low, and the Euro is falling against the Dollar after rising against the when the initial written statement was released.
On other related news, Janet Yellen’s term as Federal Reserve Chairman ends in 2018. It is widely expected that US President Donald Trump will look for a replacement, with Gary Cohn the National Economic Council Director being the front-runner. When Janet Yellen was asked today whether she would consider staying on if Donald Trump re-nominates her, she refused to answer by saying she is concentrated on her current term and hasn’t given any thought on the question asked.
If you would like to read the full statement you can download a copy below.