Janet Yellen’s Dovish Swan Song

By SNW Asset Management via Iris.xyz

Last week Janet Yellen made her final scheduled semiannual monetary report to Congress and the Senate. Her position as chair expires on February 3, 2018, and President Donald Trump has a team looking for a possible replacement. We will have to wait and see who will next lead the Federal Reserve.

Janet Yellen’s testimony was widely considered to be dovish, and the markets ended the day with equity and bond prices higher. In light of persistently weaker than expected inflation data, Yellen left the door open for a more gradual rise in interest rates than what was previously anticipated. As she said in her prepared remarks, “With inflation continuing to run below the Committee’s 2 percent longer-run objective, the FOMC indicated in its June statement that it intends to carefully monitor actual and expected progress toward our symmetric inflation goal…Of course, considerable uncertainty always attends the economic outlook. There is, for example, uncertainty about when—and how much—inflation will respond to tightening resource utilization.”

Yellen gave further lift to the markets by reiterating that any reduction in the Federal Reserve’s balance sheet will be gradual, and there is no firm date for when this tapering will begin.

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