Reuters blog archive
from Nicholas Wapshott:
The difference between the Federal Reserve Board of Chairwoman Janet Yellen and that of her immediate predecessor Ben Bernanke is becoming clear. No more so than in their approach to the problem of joblessness.
Bernanke made clear that in the post-2008 economy, his principal goal was the creation of jobs, not curbing inflation. He settled on a figure, 6.5 percent unemployment, as the threshold that would guide his actions.
While remaining true to the spirit of Bernanke’s principal goal, Yellen and the rest of her board refined the target in their meeting on March 18 and 19, a change in approach that at first sent the wrong signal to the stock and bond markets. At the press conference following the meeting, Yellen said she would not be raising interest rates “for a considerable time,” which could mean “something on the order of around six months.”
The Fed decided it would no longer be tied to the “quantitative” 6.5 percent jobless figure, which is fast being approached. The February unemployment numbers, for example, are 6.7 percent. After listening to Yellen, the markets assumed -- wrongly -- that the Fed was about to abandon the jobless target, end quantitative easing and start raising interest rates.
from The Great Debate:
In America today, anecdotes have become the new facts.
Consider Obamacare. Opponents have produced ads featuring apparently ordinary Americans telling stories about the travails forced upon them by the Affordable Care Act. One ad, financed by the Koch brothers, highlighted a leukemia sufferer named Julie Boonstra, who claimed that Obamacare had raised the cost of her medications so much that she was faced with death! Pretty dramatic stuff -- except that numerous fact-checkers found she would actually save $1,200 under Obamacare.
But what are you going to believe -- a sob story or a raft of statistics about the 7.5 million Americans who have signed up and the paltry 1 million folks who had policies canceled?
The Federal Reserve did it again, giving back to the markets at a time when it wasn't expected, and showing once again that the early months of a new Fed chair's tenure are fraught ones, in terms of interpreting monetary policy.
Janet Yellen probably didn't mean to suggest rate hikes could come as soon as six months after the bond-buying program ends for good. And the release of the Fed minutes also demonstrated that the Fed - even in discussing projections - worried about how it would all look, specifically the "dot matrix" that showed several Fed members saw higher rates before long, and really, that it was all just kind of overstated. (Yellen even said this at her press conference - that the dots did not mean what you thought they meant).
Welcome Madame Chair, here's a market selloff for you.
Fed Chair Janet Yellen made some news that she didn't expect yesterday. She perhaps thought she was offering some clarity when she answered the question from Reuters' Ann Saphir as to when the Fed might start raising interest rates. That's not how it worked, although at least in this case she didn't mouth off to Maria Bartiromo the way Ben Bernanke did eight years ago.
What we didn't see in her answer on the distance between the end of QE3 and the first rate hikes of "six months" (or something like that), is whether we will start to see any kind of reaction from the primary dealers surveyed by Reuters yesterday.
from Anatole Kaletsky:
When Janet Yellen chairs her first meeting of the Federal Open Market Committee Tuesday and Wednesday, she will be presented with a once-in-a-generation opportunity that even her predecessors in the world’s most powerful economic position have rarely enjoyed.
Not only can Yellen alter the guidance on interest rates with which the FOMC has been steering global financial markets. Beyond that she could do something far more profound and exciting: transform an entire generation’s way of thinking about economics, market forces and the role of government in achieving and maintaining prosperity.
This is the thing about delaying the new Fed chair's follow-up testimony by two weeks due to bad weather, you actually make the second hearing something that's potentially interesting. (It will depend, of course, on whether members of the Senate Committee ask provocative questions, and while you can lead a horse to water, well, you know.)
In the interim two weeks since Janet Yellen last appeared before Congress, the U.S. economic picture has gotten much more muddled. That's mostly because of poor retail sales and employment figures, and the out-of-control situation in Ukraine which has led to a regional flight of some assets. There's also been some interesting comments from the likes of Fed Governor Daniel Tarullo, who suggested the Fed should be paying more attention to the formation of asset bubbles and the use of monetary policy to curb them. That anyone is surprised at this shows how pervasive the "Fed put" option has become in the discussion of Fed activities, so we've really lowered expectations here.
from Global Investing:
Is it all over? Is the emerging market turmoil no longer a concern among investors, economists and academics? Measured at least in the last week, the market is recovering some lost ground. Maybe January's sell-off was enough and in the last week all boats seem to be rising once again. After all, there's a new Fed Chair in Janet Yellen who has now officially taken over and the likelihood of easy monetary policy, tapering of asset purchases notwithstanding, isn't expected to change.
MSCI's emerging market benchmark stock index has rebounded 3.5 percent from a Feb. 4 low. The U.S. benchmark S&P 500 stock index has risen slightly more over the same period.
An odd jobs report sets the tone for what’s likely to be another choppy day in the markets – stock futures plunged, briefly, after the Labor Department said nonfarm payrolls grew by just 113,000, but the household survey saw a drop (again) in the unemployment rate to 6.6 percent on a big gain in jobs in that survey. An odd decline of 29,000 in government payrolls offset the overall about-at-trend-but-let’s-not-kid-ourselves-about-this-being-awesome 140,000 or so gains in the private jobs market, so there’s a little bit to like, some to shake one’s head at, and still more to wonder about how many people didn’t get to work because their feet froze to the ground when they tried to get into their cars.
(More seriously on that point – the establishment survey doesn’t get some kind of massive job loss just because of a storm on a particular day of surveying, so it’s not as if a snowstorm destroys job growth, so let’s not overstate the weather issue here. It’s a factor, but don’t look for a revision to +300,000 or something.)
from Nicholas Wapshott:
President Barack Obama’s State of the Union was all about jobs. He said the word 23 times, often congratulating himself on having helped create 4 million. He urged a “year of action” to make more jobs, raise wages and create opportunities for social mobility. Then he set out on a jobs tour to persuade large companies to start hiring and pay more.
But if we assume the Tea Party-dominated House of Representatives is not going to help him here and will block any new public borrowing for infrastructure projects, what is the president to do?