The Queen Bee Speaks: Full Yellen Summary

The Queen Bee Speaks: Full Yellen Summary



Good cop, bad cop.

First the Fed “unleashed the Bullard” to explain why the incoming econ data in fact doesn’t support a March hike.

Next up was the queen bee (Lil’ Kim reference alert). Here are the talking points via Bloomberg..


Fed Chair Janet Yellen says an increase in fed funds rate will likely be appropriate at FOMC’s March 14-15 meeting if policy makers determine that employment, inflation continue to evolve in line with expectations.

  • “Indeed, at our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said Friday in text of speech in Chicago
    • Even so, monetary policy isn’t on a preset course; FOMC is ready to adjust assessment of appropriate path for policy if unexpected events materially change outlook
    • Committee generally sees labor market strengthening further, inflation at or near 2% in medium term
  • Waiting too long to scale back some support could require more rapid rate increases down the road
  • Confident in Fed’s judgment that gradual removal of accommodation is likely appropriate; gradual rate increases likely needed in months, years ahead to keep economy from overheating; no evidence Fed is behind the curve
    • Cumulative 0.75ppt of rate increases envisioned by FOMC in December for this year would be consistent with “gradual pace”
  • Process of scaling back accommodation won’t likely be as slow as in 2015-2016, absent new developments that might materially worsen outlook
    • Slower-than-expected increase in rates during those years reflected more than just inflation, job market and overseas developments; surprisingly sluggish productivity growth in U.S. and abroad suggested that fewer hikes would be needed than previously thought
  • U.S. economy has exhibited “remarkable resilience” in face of shocks over recent years; events since mid-2016 have reinforced FOMC’s confidence that economy is on track to achieve full employment, price stability
    • Job gains have remained solid, 4.8% unemployment is in line with median FOMC estimate of long-run normal level; higher energy prices may have temporarily boosted inflation
    • Prospects for further moderate economic growth look encouraging, risks from abroad appear to have receded; risks to outlook are roughly balanced
  • While economy shows great improvement, important challenges remain; real GDP growth averaging only ~2% per year, real incomes for some families still lower than before crisis
    • Unwelcome developments reflect structural hurdles that are beyond reach of monetary policy
  • Difficult to say how low current neutral rate is; assessment of impact created by post-recession headwinds is subject to great uncertainty; FOMC generally expects neutral real fed funds rate to rise to long-run level over next few years


Sounds pretty hawkish. Or not…



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