While Janet Yellen's prepared remarks [11] were her normal bland data-dependent-when-we-want-to-be, rate-hikes-maybe-sooner-or-later self, we suspect the Q&A of The Fed Chair's Humphey-Hawkins testimony will be worth the price of admission. Face to face with Jeb Hensarling - who dares to demand The Fed respond to Congressional probes [12] - will be a highlight but it will be interesting to see if the politicians suck up to their debt-monetizer-in-chief or try to score politically populist points with elections not so very far away...
Hensarling begins...
- *HENSARLING: U.S. LESS STABLE, PROSPEROUS, FREE POST-DODD FRANK
- *HENSARLING CALLS FED'S FORWARD GUIDANCE `OPAQUE'
- *HENSARLING: IT WOULD AID ECONOMY IF FED WAS MORE PREDICTABLE
- *HENSARLING SAYS THE FED IS NOT ABOVE THE LAW
- *HENSARLING: FED `CROSSED THE LINE' BY IGNORING SUBPOENA
Yellen's Testimoney is due to start at 10amET - Live Feed...
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Here is the punchline from the horse's mouth:
The Committee will determine the timing of the initial increase in the federal funds rate on a meeting-by-meeting basis, depending on its assessment of realized and expected progress toward its objectives of maximum employment and 2 percent inflation. If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy. Indeed, most participants in June projected that an increase in the federal funds target range would likely become appropriate before year-end. But let me emphasize again that these are projections based on the anticipated path of the economy, not statements of intent to raise rates at any particular time.
So what can destabilize the outlook? Apparently China and Greece continue to be in the crosshairs:
As always, however, there are some uncertainties in the economic outlook. Foreign developments, in particular, pose some risks to U.S. growth. Most notably, although the recovery in the euro area appears to have gained a firmer footing, the situation in Greece remains difficult. And China continues to grapple with the challenges posed by high debt, weak property markets, and volatile financial conditions.
But there could be good news, especially if the harsh snow we witnessed in June finally ends:
... economic growth abroad could also pick up more quickly than observers generally anticipate, providing additional support for U.S. economic activity. The U.S. economy also might snap back more quickly as the transitory influences holding down first-half growth fade and the boost to consumer spending from low oil prices shows through more definitively.
An excerpt from Bloomberg's prepared remarks [13]:
Federal Reserve Chair Janet Yellen said prospects are good for further improvement in the labor market and the economy, keeping the central bank on track for an interest-rate increase in 2015.
“If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target,” Yellen said in testimony prepared for delivery Wednesday before the House Financial Services Committee in Washington. She said Fed officials expect growth “to strengthen over the remainder of this year and the unemployment rate to decline gradually.”
Yellen, 68, again emphasized that the timing of the first rate rise in almost a decade is less important than the subsequent path of increases, which she said would be gradual. She said Fed forecasts for higher rates this year are projections and “not statements of intent to raise rates at any particular time.”
In the first of two scheduled days of testimony before Congress, Yellen repeated that the Fed will tighten policy when it sees more improvement in the labor market and is “reasonably confident” that inflation will head back toward 2 percent in the medium term.
Yellen’s testimony was similar to a speech she gave on July 10. She again acknowledged concerns over the situation in Greece and added China to her list of overseas risks.
Still, she sounded a note of optimism, saying that “economic growth abroad could also pick up more quickly than observers generally anticipate, providing additional support for U.S. economic activity.”
And here is the full statement (link) [11]
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Alternate Ending for today's testimony...
