Yellen: caution in adjusting monetary policy, which remains data-dependent, and biased towards moving too late rather than too early. However, guidance on interest rates may change: positive macro data, inflation and inflation expectations on the rise, weakening of the dollar, and stabilization of the price of oil, could turn the FOMC’s rhetoric hawkish again in the next few months……<\/p>\n
<\/p>\n
Sign up for our free newsletter to receive weekly news from BONDWorld. Click here to register for your free copy<\/strong><\/span><\/a> <\/strong><\/span><\/a><\/span><\/p>\n Intesa Sanpaolo – Research Department For professional investors and advisers only<\/strong><\/p>\n Yellen, in an articulated speech on monetary policy, sent an explicit message of caution on the adjustment of monetary policy, restoring the barycentre of the Committee to the “centristdovish” camp, after a week in which hawkish speeches had prevailed. Yellen confirmed a positive baseline scenario for the economy, while calling back attention to the wide range of risks weighing on the economic picture, in particular those tied to the international context (China, dollar and oil).<\/p>\n With respect to strategy, Yellen reasserted that monetary policy is data-dependent: the nature of such dependence has become clearer in recent months. The tightening of financial conditions at the beginning of the year, potentially capable of slowing growth, brought about a change in expectations for Fed hikes, which in turn helped ease financial conditions. The central bank will keep providing guidance, which nonetheless is a forecast, “not a plan set in stone”. As for the future, Yellen pointed out the key variables for the rate path: global growth, exchange rate, and energy prices, which may place at risk the domestic growth and inflation scenarios.<\/p>\n Yellen sees inflation as a “double-edged” risk: the recent acceleration of the price trend may be due to transitory factors, in her opinion, although it is possible that prices may actually rise at a faster pace than expected. For this reason, the Committee will continue to monitor the wage and inflation trends “carefully”. Our assessment is that the recent rise in inflation is lasting and founded, and that the Fed’s forecast is overly conservative. We expect all measures of core inflation to rise further in the next few quarters.<\/p>\n The labour market remains a key for monetary policy. In March, new information confirmed the on-going reduction of slack. March non-farm payrolls were up by 215k and data for the previous two months were revised by -1k. The 3-month average change, of 209k, is in line with the 2015 average (+221 k). The private sector created 195k jobs. Employment growth remained solid in private services (+199k) and widespread across sub-sectors (health care +51k, retail +48k, business services +37k). Positive changes were also recorded in construction (+37 k), whereas manufacturing jobs fell for the second month in a row (-29 k). The public sector created 20 k jobs. Employment from the household survey, typically volatile, increased by 246 k (3-month average: 464 k). The participation rate keeps climbing, in a very positive sign, and moves up to 63% from 62.9%, with the labor force increasing by 396 k (sixth consecutive rise, 3-month average: +484 k). The increase in the unemployment rate to 5%, due to a strong labor force change, must be read positively. The employment rate is up again, to 59.9%, from 59.8% in February. In March, hourly wages gave another welcome sign, picking up again (+0.3% m\/m, 2.3% y\/y). Overall the data goes, once again, in the right direction, especially as regards employment, labor force and hourly wages. The manufacturing weakness, against recent positive surveys, is the only minus in the report.<\/p>\n On the whole, inflation on the rise and a labour market close to full employment confirm that, despite external risks, the direction of the interest rate path remains upward. Next week, the minutes of the March FOMC meeting will be published, and should again report a wide range of opinions on the conditions required to proceed with a rate hike. The firm stance taken by Yellen clearly signals that the FOMC will rather face the risk of moving too late, than too soon. However, the recent evolution of data, dollar and oil, is compatible with our baseline scenario, i.e. a hike in June. In the month of June, part of the risks highlighted by Yellen could be more subdued, although the referendum on the UK’s European Union membership could weigh, complicating the del FOMC’s decisions<\/p>\n Source: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" Yellen: caution in adjusting monetary policy, which remains data-dependent, and biased towards moving too late rather than too early. However, guidance on interest rates may change: positive macro data, inflation and inflation expectations on the rise, weakening of the dollar, and stabilization of the price of oil, could turn the FOMC’s rhetoric hawkish again in […]<\/p>\n","protected":false},"author":2,"featured_media":3744,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1956","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1956","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1956"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1956\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3744"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1956"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1956"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n
\n