16 Jul 2014
Yellen sticks closely to Fed’s recent stance during testimony - ING
FXStreet (Łódź) - Rob Carnell from ING comments on Fed chief Janet Yellen´s testimony before the US Senate Banking Committee on Tuesday, saying that she stuck very closely to the Fed’s recent stance, as expected.
Key quotes
"Though she mentioned that if the labour market improved faster than envisioned by the Fed, that rates might be raised earlier, she quickly countered this with the opposite scenario. No hint that risks are skewed in one direction more than the other, therefore."
"This speech did not mark a sea-change in Fed policy, though if the labour market continues to improve as we expect, and the Fed finds its 6.0-6.1% end of year unemployment rate target breached within the next couple of months (which looks highly likely), then we believe Yellen will have to change her tune (we see the September
FOMC and press briefing as a great opportunity for her to do this)."
"If not, we think the market will turn anyway – believing the Fed to be falling behind the curve."
"One final point of interest regarding the exit strategy – Yellen noted that the principal tool would be the interest on excess reserves."
"Reverse Repos would likely not be used to a large degree, on fears that the market would become too large. And both would operate with a large spread (to Fed funds presumably)."
Key quotes
"Though she mentioned that if the labour market improved faster than envisioned by the Fed, that rates might be raised earlier, she quickly countered this with the opposite scenario. No hint that risks are skewed in one direction more than the other, therefore."
"This speech did not mark a sea-change in Fed policy, though if the labour market continues to improve as we expect, and the Fed finds its 6.0-6.1% end of year unemployment rate target breached within the next couple of months (which looks highly likely), then we believe Yellen will have to change her tune (we see the September
FOMC and press briefing as a great opportunity for her to do this)."
"If not, we think the market will turn anyway – believing the Fed to be falling behind the curve."
"One final point of interest regarding the exit strategy – Yellen noted that the principal tool would be the interest on excess reserves."
"Reverse Repos would likely not be used to a large degree, on fears that the market would become too large. And both would operate with a large spread (to Fed funds presumably)."