Dove, hawk, or nothing at all? That's the question as Fed chief Janet Yellen speaks after she receives the Radcliffe Medal from Harvard University's Radcliffe Institute for Advanced Study. There are no prepared remarks, but a scheduled 30-minute Q&A session with Greg Mankiw could give insight into Yellen's thoughts on two key issues: whether she now has more faith that recent evidence of rising inflation is convincing, and the degree to which she feels overseas risks have receded. Most (including the market) expect Yellen to stick to the hawkish meme ascribed by the latest FOMC statement and numerous Fed speakers. Some, including DoubleLine's Jeff Gundlach expect a dovish Yellen to re-appear. Still others believe she will say nothing at all - instead waiting for a more formal speech on June 6 to drop her tape bombs.
As SocGen notes, Fed Chair Yellen will be honoured at Harvard, with a conversation on her achievements at the ceremony. However, little emphasis on the monetary policy outlook is expected at this event. The appearance to look forward to will be the Chair's speech in Philadelphia on June 6, the Monday following the May employment report and a day before entering the blackout period for the upcoming FOMC meeting.
Live Feed (The event started at 1030ET with Yellen is due to speak at 1315ET.. though it appears they are running late)...
- *BERNANKE SAYS WE'RE LUCKY TO HAVE YELLEN LEADING THE FED
- *YELLEN: AMERICA OWES BERNANKE ENORMOUS DEBT OF GRATITUDE
- *YELLEN: CAPITALISM IS BEST ECONOMIC SYSTEM BUT CAN BREAK DOWN
- *YELLEN: WE WANT TO DO EVERYTHING TO HEAD OFF A FINANCIAL CRISIS
And this happened...
- *YELLEN: FED'S HANDLING OF FINANCIAL CRISIS WAS MAGNIFICENT
- *YELLEN: QE, FORWARD GUIDANCE HAVE HELPED ECONOMY RECOVER
- *YELLEN: WE DIDN'T SEE HOW HOUSING BUBBLE CREATED SYSTEMIC RISK
- *YELLEN: WE ARE TRYING NOW TO DO BETTER JOB OF SEEING RISKS
- *YELLEN: WE ARE FOCUSED ON SYSTEMIC RISK, FINANCIAL STABILITY
- *YELLEN: WE'RE BRINGING NEW MINDSET TO HOW WE OVERSEE BIG FIRMS
- *YELLEN: QUANTITY, QUALITY OF BANK CAPITAL HAS IMPROVED
And then she said...
- *YELLEN: ECONOMY IS CONTINUING TO IMPROVE
- *YELLEN: WITH GAINS, HIKE IN COMING MONTHS MAY BE APPROPRIATE
- *YELLEN: DON'T HAVE TYPICAL SCOPE TO CUT RATES IN CASE OF SHOCK
And this happened...
And so admitting that The Fed needs to raise rates to be able to cut rates has sent stocks lower...
click image for link to Harvard live feed - no embed available
With verious Fed presidents having whipping up the market into a hawkish frenzy in the past two weeks, leading to a dramatic repricing in summer rate hike odds with expectations for a July rate hike now over 50%, many can be "disappointed" by Yellen's speech today, at least according to Jeff Gundlach who said Yellen appears to be more cautious on raising interest rates and he expects her comments to be dovish again on Friday, when she is scheduled to speak at an event in Harvard-Radcliffe.
Specifically, during a DoubleLine event in Bevely Hills, he said said the Fed is "a bit stuck" given that it will not have ammunition available for the next recession unless it raises rates, despite continued lackluster economic growth. He noted that some developed countries, including Australia and Sweden, tried to raise interest rates in 2010, but ended up having to reverse course. "The Fed seems hell bent on raising interest rates until something breaks, which is what happened in these countries," he said.