What does Janet Yellen have in common with Britney Spears? Nothing except that Yellen may soon be singing, “Oops!...I Did It Again.” Unlike FRB-Dallas President Richard Fisher (see previous post, dated 3/5), she is much more focused on the impact of monetary policy on the labor markets than on the financial markets. In her 3/5 ceremonial swearing-in speech, she said:
Too many Americans still can't find a job or are forced to work part-time. The goals set by Congress for the Federal Reserve are clear: maximum employment and stable prices. It is equally clear that the economy continues to operate considerably short of these objectives. I promise to do all that I can, working with my fellow policymakers, to achieve the very important goals Congress has assigned to the Federal Reserve.
Yellen has said that the Fed won’t make the same mistakes again as the ones that led to the latest financial crisis. She also has admitted that she didn’t see it coming, but claims that she will be more vigilant this time. Odds are that Fisher will see it coming before she does, given that the gentleman from Dallas is much more concerned about stopping speculative bubbles, while the lady from DC is much more obsessed about reviving the labor market.
FRB-New York President Bill Dudley, whose views tend consistently to be nearly the same as Yellen’s, spoke on Friday after the release of February’s better-than-expected employment report. He made no mention of it. Instead, he indicated that he still wants to see more progress in the labor market: “I do expect that growth will be strong enough to lead to continued improvement in labor market conditions. I must caution, however, that the outlook for the unemployment rate is unusually uncertain.” He concluded: “Hence, the continued need for monetary policy to remain highly accommodative to support the economic recovery to the fullest.”
In other words, the dovish majority on the FOMC will maintain ultra-easy monetary policy for the foreseeable future. They will probably continue to taper QE, but they’ll keep the federal funds rate near zero. Stock prices are likely to continue rising into record-high territory. Richard Fisher will give more speeches about speculative bubbles.
FRB-New York President Bill Dudley, whose views tend consistently to be nearly the same as Yellen’s, spoke on Friday after the release of February’s better-than-expected employment report. He made no mention of it. Instead, he indicated that he still wants to see more progress in the labor market: “I do expect that growth will be strong enough to lead to continued improvement in labor market conditions. I must caution, however, that the outlook for the unemployment rate is unusually uncertain.” He concluded: “Hence, the continued need for monetary policy to remain highly accommodative to support the economic recovery to the fullest.”
In other words, the dovish majority on the FOMC will maintain ultra-easy monetary policy for the foreseeable future. They will probably continue to taper QE, but they’ll keep the federal funds rate near zero. Stock prices are likely to continue rising into record-high territory. Richard Fisher will give more speeches about speculative bubbles.
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