Arab Today, arab today economy markets test patience of fed chief yellen
Last Updated : GMT 05:35:58
Arab Today, arab today
Arab Today, arab today

Economy, markets test patience of Fed chief Yellen

Arab Today, arab today

Arab Today, arab today Economy, markets test patience of Fed chief Yellen

Chair of the Federal Reserve, Janet Yellen
Washington - AFP

Janet Yellen could be losing patience. And that could mean a lot for global markets.

When the chair of the Federal Reserve said Wednesday that stocks were overvalued and bond yields too low, it was a signal that investors should not expect to indulge on the Fed's cheap dollars forever.

But after a knee-jerk reaction to the warning, two days later Wall Street was back near record highs and bond yields even lower than before Yellen spoke.

The reason? Friday's April jobs report that suggested the economy still has some ways to go to meet the Fed's criteria for beginning to raise interest rates. And that means more easy money for investors.

When Yellen became Fed chair 15 months ago the path ahead seemed clear: end the huge quantitative easing stimulus program of her predecessor, Ben Bernanke, in October 2014, and then after around six months begin raising interest rates.

That was the path toward "normalization," easing out of the crisis-era monetary policy that had the Fed pumping trillions of dollars into the economy even with its benchmark interest rate stuck at zero for six years.

It was nearing the time to normalize. As 2014 progressed, the United States generated more than 3 million new jobs and the unemployment rate sank toward the Fed's target.

Inflation, which the Fed wants to bring to 2.0 percent, did not pick up, but there were reasons for that, like the oil price crash.

Meanwhile, the easy money policy was fueling stock and property speculators while its impact on overall growth was starting to diminish.

The Fed repeatedly implied that a rate rise could come around mid-year 2015. In March, it sent a major signal for the coming hike, by dropping from its policy statement a pledge to remain "patient" for the economic data to improve.

But since then, patient is what the Fed has had to be. US economic growth stalled in the first quarter, and markets read that as meaning a longer wait for a rate rise, even though the Fed stressed that the slowdown was mainly for "transitory" reasons, like the severe winter weather.

- Yellen sees market 'dangers' -

Yellen made clear this week that she is  concerned that markets have too easily shrugged off a rate hike and the turmoil it could bring to markets.

Stock valuations "generally are quite high," she said at a finance forum Wednesday. "There are potential dangers there."

Bond markets were risky too. "We need to be attentive to the possibility that when Fed decides it's time to begin raising rates, these term premiums could move up and we could see a sharp jump in long term rates," she said.

Stocks took the calculated message at face value, sinking sharply, while bond yields spiked higher -- for all of two days.

Then came the April jobs report which suggested the winter slowdown was not completely past. The job creation number was pretty strong, and unemployment fell to 5.4 percent.

But there was no sign of rising wages -- an indicator Yellen herself has focused on to show labor market tightening.

Moreover, the labor force participation rate, the measure of what percent of working-age Americans are actually working or seeking jobs, remained at a post-2008 crisis low of 62.8 percent, compared to more than 66 percent before the crisis.

This indicates that millions of people have dropped out of the workforce, discouraged by the paucity of jobs and the low wages on offer. And if wages don't rise, consumer spending and economic momentum stay weak.

"This dynamic means there’s more slack in the job market than the relatively low unemployment rate suggests," said Jared Bernstein, a former White House economist with the Center on Budget and Policy Priorities.

Yellen is clearly caught between the economy and markets in deciding the first rate rise. While her primary guide has to be the economic data, she cannot ignore potential bubbles in asset markets, even if those markets ignore her.

That could mean breaking the ice even if the economy still shows weakness, some analysts say.

"She seems to be hinting that they're going to have to raise rates one way or the other as long as the economy is growing at all," said Chris Low, chief economist at FTN Financial.

 

 

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today economy markets test patience of fed chief yellen Arab Today, arab today economy markets test patience of fed chief yellen

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today economy markets test patience of fed chief yellen Arab Today, arab today economy markets test patience of fed chief yellen

 



Arab Today, arab today
Arab Today, arab today Youssra depended on colored foam

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam
Arab Today, arab today A no-frills business success

GMT 07:00 2017 Wednesday ,20 September

A no-frills business success
Arab Today, arab today Etiquette expert underlines importance of gifts

GMT 17:52 2017 Sunday ,03 September

Etiquette expert underlines importance of gifts
Arab Today, arab today Israel sees benefits in independent Kurdistan

GMT 07:58 2017 Wednesday ,20 September

Israel sees benefits in independent Kurdistan
Arab Today, arab today Saudi Arabia to unblock internet calling apps

GMT 11:31 2017 Wednesday ,20 September

Saudi Arabia to unblock internet calling apps
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Ministry seeks to improve education

GMT 14:49 2017 Sunday ,17 September

Ministry seeks to improve education
Arab Today, arab today New Zealand opposition looks

GMT 10:35 2017 Thursday ,14 September

New Zealand opposition looks
Arab Today, arab today Puerto Rico, Virgin Islands brace

GMT 12:01 2017 Wednesday ,20 September

Puerto Rico, Virgin Islands brace
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today Intel chips loaded in Waymo

GMT 14:43 2017 Wednesday ,20 September

Intel chips loaded in Waymo
Arab Today, arab today Five trends at the Frankfurt auto show

GMT 12:04 2017 Monday ,18 September

Five trends at the Frankfurt auto show
Arab Today, arab today Horia Farghaly happy for success of “Case G”

GMT 12:14 2017 Monday ,18 September

Horia Farghaly happy for success of “Case G”
Arab Today, arab today France hopeful of persuading Trump

GMT 06:21 2017 Wednesday ,20 September

France hopeful of persuading Trump

GMT 06:31 2017 Saturday ,16 September

Eman Al Assy receives three offers

GMT 05:05 2017 Tuesday ,12 September

Pregnant woman's suicide roils China

GMT 16:53 2017 Saturday ,02 September

Mai importance of gifts during Eid Al-Adha

GMT 19:18 2017 Monday ,18 September

5,000 'Dieselgate' deaths in Europe per year

GMT 10:46 2017 Saturday ,05 August

Nanis reveals simple ideas for home renovation

GMT 04:26 2017 Wednesday ,20 September

Opioid overdose deaths take 2.5 months

GMT 11:40 2017 Monday ,18 September

Russia and Iraq restore air travel

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 12:56 2017 Friday ,15 September

Apple's grand plan in Ireland held up by a forest

GMT 11:37 2017 Saturday ,12 August

Fashion designer reveals her new collection
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday