Thursday, March 16, 2017
Janet Yellen just made an unsettling admission about the economy
It didn't take long for Janet Yellen to rid investors of that rare feeling of predictability from the Federal Reserve.
"The data have not notably strengthened," the Fed chair said during her Wednesday press conference after the central bank raised interest rates for just the third time since the financial crisis.
This hike was one of the least surprising to markets, with traders pricing in a full 100% chance that it would take place. The Fed chair just killed that kind of confidence for any move going forward.
Yellen was talking about the lack of economic progress since the Fed's most recent meeting, in January. She went further, though, saying the Fed didn't see any evidence that the optimism of a record-breaking stock market had made its way into spending by companies or people.
Investors are desperately seeking clarity on the timing of future rate increases, and they will now be left to speculate as to whether May, June, or September will bring the next move. Much hangs on President Donald Trump's ability to push through the promised agenda of tax cuts and infrastructure spending that has fueled Wall Street's benchmark higher. The early reception of the healthcare plan put forward by Trump and House Republicans is hardly encouraging.
The Fed has a lot of wiggle room, though. US inflation continues to run below its target and is expected to do so for the foreseeable future. Another reason not to rush the next hike: The Atlanta Fed's GDPNow indicator has just slipped rather sharply in a matter of weeks to just 0.9% from 2.5% for the first quarter.
Federal Reserve Bank of Atlanta