Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Watch Live: Hawkish Yellen Says Fed May Have Misjudged Inflation, Labor Market

Courtesy of ZeroHedge. View original post here.

Update: In her prepared remarks, Yellen crucially said,

“A more important issue from a policy standpoint is that some key assumptions underlying the baseline outlook could be wrong in ways that imply that inflation will remain low for longer than currently projected.”

As Bloomberg explains, she is stating a bit more clearly than before that the FOMC doesn’t have a handle on why inflation is low and acknowledging that it may last longer than they predict.

*  *  *

As we detailed earlier, on the heels of Bostic ("we didn't blow any bubbles") Brainard ("some barriers to growth are structural") this morning and Kashkari ("no inflation"), Evans ("need more data"), and Dudley ("inflation's coming soon") yesterday; it is Fed Chair Janet Yellen's turn to speak this afternoon on "Inflation, Uncertainty and Monetary Policy" as the dollar extends its post-FOMC gains (to 1-month highs).

Since The FOMC, Fed Speakers have been active…

Raphael Bostic, Atlanta Fed president: "I actually don’t think that our policies are too easy in the sense of really facilitating some sort of asset bubble."

Lael Brainard, Fed governor: Benefits of a lengthy U.S. recovery “can only go so far” and some barriers appear to be structural, sees "widening gulf" between large, small cities.

Neel Kashkari, president Minneapolis, FOMC voter in 2017: “I don’t see inflation taking off so I see no need to tap the brakes.”

Charles Evans, president Chicago Fed, voting member: “I think we need to see clear signs of building wage and price pressures before taking the next step in removing accommodation.”

William Dudley, president New York Fed, permanent voter (and most notably considered to be closely aligned with Yellen's way of thinking): “With a firmer import price trend and the fading of effects from a number of temporary, idiosyncratic factors, I expect inflation will rise and stabilize around the FOMC’s 2 percent objective over the medium term.

As a reminder, the Fed Chair said that "we don't fully understand inflation" and added that the "shortfall of inflation this year is more of a mystery," but, while Yellen speaking would normally be must-watch, with only a few days having passed since her post-statement press conference, we wonder just how much flip-flopping is possible. At that appearance, the Fed chief also downplayed the significance of the weak core inflation data as the central bank set the start date for the reduction of its balance sheet and signaled that an additional rate hike this year remained appropriate.

Additionally, though we doubt she will comment on it, Republican Senator Richard Shelby said he doesn’t think President Donald Trump will nominate Yellen for a second term at the helm of the U.S. central bank. Shelby said Tuesday in an interview with Bloomberg Television’s Vonnie Quinnthat he had spoken with the president about the Fed.

“I believe he will appoint somebody else to take her place,” the No. 2 Republican on the Senate Banking Committee said. “But ultimately, that is up to the president.”

Live Feed (from The National Association of Business Economics)

click image for link to Bloomberg's Live Coverage

Headlines include (via Reuters)

  • YELLEN SEES 'CONSIDERABLE' ODDS THAT INFLATION WON'T STABILIZE AT 2-PCT OVER NEXT FEW YEARS
  • FED'S YELLEN SAYS UNCERTAINTIES STRENGTHEN CASE FOR GRADUAL RATE HIKES
  • YELLEN SAYS GRADUAL APPROACH TO RATE HIKES PARTICULARLY APPROPRIATE IN LIGHT OF SUBDUED INFLATION, LOW NEUTRAL RATE
  • YELLEN SAYS THERE IS A RISK INFLATION EXPECTATIONS ARE NOT AS WELL-ANCHORED AS THEY APPEAR
  • YELLEN SAYS DATA SUGGESTS LABOR MARKET IS HEALTHY, WITHOUT SUBSTANTIAL SLACK AND NOT OVERHEATED
  • YELLEN SAYS EVIDENCE ON LABOR MARKET NOT DEFINITIVE, MUST BE 'OPEN-MINDED'
  • YELLEN SAYS WOULD BE IMPRUDENT TO LEAVE RATES ON HOLD UNTIL INFLATION REACHES 2 PCT
  • YELLEN SAYS FED CAN STILL ACHIEVE 2-PCT INFLATION GOAL EVEN IF IT IS UNDERESTIMATING SLACK OR OVERESTIMATING INFLATION EXPECTATIONS
  • FED'S YELLEN SAYS LOW INFLATION LIKELY DUE TO TRANSITORY FACTORS, SEES MANY UNCERTAINTIES
  • YELLEN SAYS DOWNWARD PRESSURE ON INFLATION COULD PROVE UNEXPECTEDLY PERSISTENT
  • YELLEN SAYS FED SHOULD BE `WARY OF MOVING TOO GRADUALLY'
  • YELLEN SAYS WOULD BE IMPRUDENT TO LEAVE RATES ON HOLD UNTIL INFLATION REACHES 2 PCT

Via Bloomberg:

Fed Chair Janet Yellen said FOMC may have misjudged fundamental forces driving inflation and strength of labor market, and policy makers “stand ready to modify our views based on what we learn.”

  • “We will need to stay alert” and adjust monetary policy as information comes in, Yellen said in text of speech Tuesday in Cleveland during annual meeting of National Association for Business Economics 
  • “My colleagues and I must be ready to adjust our assessments of economic conditions and the outlook when new data warrant it”

Downward pressures on inflation “could prove to be unexpectedly persistent”

  • Economic outlook is subject to “considerable uncertainty”

FOMC’s understanding of the forces driving inflation is “imperfect,” policy makers recognize “something more persistent” may be responsible for current undershooting of long-run objective

  • While inflation will most likely stabilize around 2% over the next few years, “odds that it could turn out to be noticeably different are considerable”
  • There’s also risk that inflation expectations “may not be as well anchored as they appear and perhaps are not consistent with our 2 percent goal”

Stabilizing inflation at around 2% “could prove to be more difficult than expected” 

Key assumptions underlying baseline outlook “could be wrong” in ways that imply inflation will remain low for longer than currently projected; for example, labor market conditions may not be as tight as they appear

Under certain conditions, “continuing to revise our assessments in response to incoming data would naturally result in a policy path that is somewhat easier than that now anticipated”

Significant uncertainties strengthen the case for gradual pace of tightening; however, Fed must also be wary of moving too gradually; “it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent”

Actual value of long-run sustainable unemployment rate “could well be noticeably lower” than FOMC currently projects; can’t rule out possibility that some slack still remains in labor market

  • Unemployment rate is probably “correct” in signaling that labor-market conditions have returned to pre-crisis levels; however, that doesn’t necessarily mean that economy is now at full employment
  • Data suggest a generally healthy labor market, although can’t make “any definitive assessment”; policy makers “must remain open minded on this question” and its implications for reaching inflation goal 

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!