Traders looking to get an early start on the holiday weekend will have to wait a bit longer today, as Janet Yellen is set to speak to a sold-out audience at the Providence, Rhode Island Chamber of Commerce’s Economic Outlook Luncheon today.
Yellen will discuss the prospects for the economy and will likely parrot the usual talking points about consistent employment gains and a generally positive environment for growth — “transitory” Q1 weakness notwithstanding.
The Fed chief will also likely reiterate that ‘lift-off’ will probably come later this year, because as we learned earlier this week, the BEA and Yellen’s friends at the San Francisco Fed have now given the FOMC the all-clear to ignore Q1 GDP because once the data undergoes a second seasonal adjustment, the economy will be shown to have performed fine after all meaning the rate hike can proceed as planned.
As a reminder, earlier in the session we got a core CPI print that ostensibly indicates that inflation is moving in the desired direction providing further breathing room for the Fed to tighten (although our take on the data was a bit different).
- *YELLEN SAYS RATE RISE AT SOME POINT THIS YEAR IS APPROPRIATE
- *YELLEN SAYS `WE ARE NOT THERE YET' ON FED'S EMPLOYMENT GOALS
- *YELLEN SAYS GRADUAL PACE OF TIGHTENING IS LIKELY AFTER LIFTOFF
- *YELLEN: SOFT FIRST QUARTER LARGELY RESULT OF TRANSITORY FACTORS
- *YELLEN: FED NEEDS REASONABLE CONFIDENCE ON PRICES FOR LIFTOFF
Alternate Live Feed (click image for link to Bloomberg Live Feed)
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Given this economic outlook and the attendant uncertainty, how is monetary policy likely to evolve over the next few years? Because of the substantial lags in the effects of monetary policy on the economy, we must make policy in a forward-looking manner. Delaying action to tighten monetary policy until employment and inflation are already back to our objectives would risk overheating the economy. For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy.
And here is Yellen blaming the "snowy winter"
The Commerce Department's initial estimate was that real gross domestic product was nearly flat in the first quarter of 2015. If confirmed by further estimates, my guess is that this apparent slowdown was largely the result of a variety of transitory factors that occurred at the same time, including the unusually cold and snowy winter and the labor disputes at ports on the West Coast, both of which likely disrupted some economic activity. And some of this apparent weakness may just be statistical noise.
Finally, why Yellen is bullish...
I therefore expect the economic data to strengthen.
... and yet she still refuses to hike rates.
- *YELLEN EXPECTS INFLATION TO MOVE UP TO 2% AS ECONOMY GAINS
- *YELLEN SAYS SHE EXPECTS ECONOMY TO STRENGTHEN AFTER WEAK 1Q
- *YELLEN SAYS IT WILL TAKE TIME FOR HEADWINDS TO FULLY ABATE
- *YELLEN SAYS GROWTH TO BE MODERATE OVER REST OF 2015 AND BEYOND
- *YELLEN: `SEVERAL YEARS' BEFORE RATES BACK TO LONG-RUN LEVELS
- *YELLEN SAYS EURO ZONE RECOVERY APPEARS TO BE ON FIRMER FOOTING
- *YELLEN: FED'S POLICY COURSE WILL BE DETERMINED BY INCOMING DATA
- *YELLEN SAYS PACE OF TIGHTENING COULD SPEED UP OR SLOW DOWN
- *YELLEN: U.S. SHOULD PURSUE POLICIES THAT SUPPORT PRODUCTIVITY
- *YELLEN SAYS CHINA AND SOME OTHER EMERGING ECONOMIES HAVE SLOWED
- *YELLEN SAYS RECENT DATA ON PRODUCTIVITY HAVE BEEN DISAPPOINTING
Full speech below...