On March 19, Federal Reserve Chair Janet Yellen held her first hour-long press conference after the regular meeting of the Federal Open Market Committee (FOMC) and said essentially nothing.
Yet a market eager to find nuances sold off by triple digits, as often seems to happen when Fed officials try to reiterate existing policy in slightly different language. Evidently the statement was written by the same staffers who wrote them under Chairman Ben Bernanke, because they have been extremely repetitious, and it took 15 minutes to read a statement that could probably have been given in three minutes. Nevertheless, there were a few tidbits of information to be gleaned.
The latest statement deleted the reference to 6.5 percent as a level of unemployment that should be expected to lead to a change in policy, and Yellen explained that this was because recent figures show that unemployment has dropped to 6.5 percent. However, this was not news, because in recent congressional testimony she has said clearly that as unemployment dropped toward 6.5 percent, the FOMC would look at a broader range of indicators.
There was a dissent to the FOMC statement, but this time it was from Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, from a dovish perspective. Also, there was a reference to a statement by William Dudley, president of the Federal Reserve Bank of New York, who appears to be looking for ideas that would lead toward a cessation of the tapering of quantitative easing (QE). As these articles have been saying, this appears to be the position of Wall Street, as expressed by Sen. Chuck Schumer, D-N.Y., and Rep. Carolyn Maloney, D-N.Y., when Yellen recently testified before the congressional banking committees.
As expected, a reporter asked about the FOMC's evaluation of the situation in the Ukraine, and Yellen responded that concerns are not great enough to appear on the radar screen. She did not respond to a question as to whether Russia had moved $100 billion out of New York Fed custody in anticipation of possible financial sanctions.
There were about half a dozen questions that were not very good, which is common at these press conferences. One of them was about differences between Yellen's agenda and that of Bernanke. This is strange, because Yellen has done everything she can do to emphasize the continuity between them. She repeated that their approaches to monetary policy are consistent, but it was a bit interesting that she took the trouble to mention ending "too big to fail" and monitoring threats to the financial system.
The financial markets reacted to a statement by Yellen that the time when interest rates might start to rise could be on the order of six months from when tapering of QE ends near the end of this year. To me, this sounded consistent with previous statements, and some pundits have said this, but for some reason the markets focused on this.
One of the themes of these articles is that regardless of the timetable the Fed has in mind, and Yellen made a specific reference to a "shallower glide path" toward higher rates, in view of the slow economic recovery, the markets may have a different idea. Thus, the timetable for a significant increase in interest rates may not be under the Fed's control.
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