Janet Yellen is set to begin the first part of her two-day excuse-fest for why The Fed will raise rates (market implied odds at 74%) in December despite Chinese stocks crashing again [11], carnage in commodities [12], a revenues recession [13], plunging EBITDA [14], a collapse in US manufacturing [15], housing rolling over [16], and auto sales fading (yes, read the facts here [17]). Few expect her to rock the boat to change the market's perception, especially following Lockhart's confirmation that The Fed's job mandate has been met.
Yellen will speak before the Economic Club of Washington at 12:25 p.m. ET. She also testifies on the economic outlook before a joint committee of Congress on Thursday.
- *YELLEN: LABOR MARKET GAINS BOLSTER HER CONFIDENCE ON INFLATION
- *YELLEN: DELAYING LIFTOFF TOO LONG RISKS ABRUPT TIGHTENING LATER
- *YELLEN: DOWNSIDE RISKS FROM ABROAD HAVE LESSENED SINCE SUMMER
- *YELLEN: DATA SINCE OCT. FOMC SHOW LABOR MARKET GAINS
- *YELLEN: FISCAL POLICY TO BE POSITIVE FOR GROWTH IN COMING YRS
- *YELLEN SEES RISKS TO OUTLOOK AS `VERY CLOSE TO BALANCED'
- *YELLEN SAYS SLOWDOWN IN CHINA LIKELY TO BE MODEST AND GRADUAL
- *YELLEN: CHINA HAS TAKEN ACTION AND COULD DO MORE IF NEEDED
- *YELLEN SAYS HOUSEHOLD SPENDING PARTICULARLY SOLID IN 2015
The punchline:
Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession
Ironically, it is rate hikes that have been the cause of every single recession since the arrival of the Fed.
The full speech can be found here [18], and a word cloud is below:
Live Feed:
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As Reuters notes, [20]
When Yellen takes the stage at the Economic Club of Washington shortly after noon on Wednesday, she will do so with market expectations already aligned behind a December hike, and the flow of economic data since the Fed's last meeting offering no clear reason to hold back.
The data has not all been great. Recent data on consumer spending and manufacturing have caused some analysts to pare back estimates of economic growth. Global trends that have weighed on the Fed's outlook for a year now also remain intact - the high value of the dollar, the low and unsteady price of oil, and weak world growth.
But the U.S. jobs outlook continues to be strong. Economists in a recent Reuters poll expect Friday's monthly employment report from the Labor Department to show around 200,000 additional jobs were created in November, an outcome that would support the Fed's first rate increase in nearly a decade.
Even some rate hike opponents like Chicago Fed president Charles Evans have shifted tone, focusing now on the need for rate increases to proceed only gradually rather than on battling a liftoff decision that seems nearly ordained.
"It is vital that when we first raise rates, the (Federal Open Market Committee)... strongly and effectively communicates its plan for a gradual path for future rate increases," said Evans.
To whiuch we offer...When ISM Manufacturing dropped to this level in early 2008, people largely ignored it at first... then The Fed unleashed QE1 to save the world... same again in 2012...
Of course, if anything she says is misunderstood, a host of Fed speakers make appearances through the day, including San Francisco Fed President John Williams, Federal Reserve Board Governor Daniel Tarullo and Philadelphia Fed President Patrick Harker.
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Full Speech below:


