Tuesday, 21 November, 2017

Yellen words to be parsed for rates clues

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Juana Turner | 13 July, 2017, 00:34

Whilst a rate hike is borderline certain, the timing is not; data packages such as these can tip the balance in favour of a hawkish sentiment for the Federal Reserve.

"I absolutely intend to serve out my term", she told a member of the House Financial Services Committee during a three-hour hearing.

The U.S. dollar continued to be lower against its major counterparts in the European session on Wednesday, after the Fed Chair Janet Yellen asserted that the central bank is expected to raise rates gradually over time to attain inflationary target and sustain the economic expansion. In Europe, the Stoxx 600 Index was 0.7% higher at 5:40am with energy stocks leading the gains.

"International investors are less likely to understand the nuances of US political risk, and more likely to overreact".

The U.S. economy continues to churn out jobs and grow at a steady pace, with investment and consumer confidence both healthy and only moderate signs of risk in financial markets, the U.S. Federal Reserve said on Friday in its semiannual report to Congress.

That rate forecast was included in the Fed's semi-annual monetary report to Congress, which Chair Janet Yellen will deliver to Congress next week. Yellen specifically said that this normalization plan is expected to begin this year. Brent crude was last trading at $48.20 a barrel, while WTI was at $45.80. Yellen recently said that asset prices by some measures "look high, but there's no certainty about that".

"Because the neutral rate is now quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance", Yellen will tell Congress.

Yellen's testimony still noted that she expects gradual rate hikes to be appropriate over the next few years.

The statement from Yellen diverted attention from the release of emails by Donald Trump Jr. about his controversial meeting with a Russian lawyer, though concern remains that the latest saga in Washington may be an unwelcome distraction for the Fed seeking to dismantle a decade of monetary stimulus.

'Up to now, the Fed has steadfastly maintained that inflation will pick up eventually.

The peso bucked the trend for the day, falling to 50.55 from its previous close of 50.53 after hitting its lowest since 2006 in its previous session as data showed that Philippines posted its widest trade deficit in decades in May.

She concluded her remarks by saying that "the committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved exclusively by reducing the federal funds rate". On Thursday morning, Yellen will speak before the Senate Committee on Banking, Housing, and Urban Affairs.

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