Goldman's Yellen Post-Mortem: A Snoozer
Today, Jan Hatzius was almost as fast as Jon Hilsenrath. Below is his Yellen post-mortem. Well, of her speech that is.
BOTTOM LINE: Fed Chair Yellen's prepared remarks for her semiannual monetary policy testimony before the House Financial Services Committee were brief and did not contain any major surprises. The testimony itself will begin at 10:00am.
1. Yellen's remarks highlighted the cumulative progress made in the labor market recovery, but also noted that "recovery in the labor market is far from complete" and that it is important to "consider more than the unemployment rate when evaluating the condition of the U.S. labor market." These remarks suggest that Yellen views the labor market as having ample remaining slack.
2. She stated that inflation should move back towards 2% over coming years, and that some of the recent softness reflects factors that "seem likely to prove transitory, including falling prices for crude oil and declines in non-oil import prices."
3. Yellen indicated that as long as incoming information is broadly consistent with the Committee's expectations, it will likely reduce the pace of asset purchases in further measured steps at future meetings, although purchases are not on a preset course. She also reiterated that the 6.5% threshold is not an automatic trigger for higher rates, as Fed officials have often emphasized in the past.
4. With regard to recent developments, Yellen did not explicitly address the soft patch in US economic data since the start of the year, but did state that recent volatility in global financial markets did not seem to pose a substantial risk to the U.S. economic outlook "at this stage
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