Back
14 Nov 2013
Yellen confirmation hearing reinforces expectation of continuing loose Fed policy
Speaking at her confirmation hearing before the Senate committee on Banking, Housing, and Urban Affairs, Janet Yellen today set out her agenda as the incoming chairman of the US Federal Reserve. In a pre-released speech, Yellen announced stated that “(The Federal Reserve) has made good progress, but we have farther to go to regain the ground lost in the crisis and the recession.
“Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time.”
Yellen added: “For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. “
Ultra-dove Yellen gave the market what they wanted to hear, with a cautious stance towards the removal of Fed support for the US economy.
In response to questions from the senate, Yellen said that: “It’s important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero.”
Her performance before the senate was as expected – an ultra-dove carrying on in the same manner as her predecessor Ben Bernanke. Despite a lack of anything surprising, the dollar drifted lower on confirmation that the US is set for more loose policy. EUR/USD climbed to USD1.3471, climbing back from poor GDP figure-induced lows of USD1.3419.
“Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time.”
Yellen added: “For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. “
Ultra-dove Yellen gave the market what they wanted to hear, with a cautious stance towards the removal of Fed support for the US economy.
In response to questions from the senate, Yellen said that: “It’s important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero.”
Her performance before the senate was as expected – an ultra-dove carrying on in the same manner as her predecessor Ben Bernanke. Despite a lack of anything surprising, the dollar drifted lower on confirmation that the US is set for more loose policy. EUR/USD climbed to USD1.3471, climbing back from poor GDP figure-induced lows of USD1.3419.