New US Federal Reserve Chairwoman Janet Yellen is expected to stick to the game plan when she chairs her first monetary policy meeting this week, further cutting back economic stimulus.
Yet, six weeks after inheriting former Fed chairman Ben Bernanke’s mantle, she is also under the gun to make a pivot in the way the Fed has been signaling its intentions.
Handled well, that delicate shift in how the Fed foreshadows an eventual rate hike could assuage markets.
Communicated badly, it could result in volatile movements and leave the new Fed boss on the back foot.
WEATHER IMPACT
The first meeting under Yellen’s lead of the US Federal Open Market Committee (FOMC), tomorrow and Wednesday, is expected to conclude that unusually harsh winter storms were mainly behind the slowdown in economic activity in December last year to last month.
The Fed has cut the program by US$20 billion to US$65 billion a month since the beginning of the year, and another US$10 billion cut could be decided this week.
Yellen already showed her bias toward the weather explanation when she testified before the US Senate on Feb. 27.
Taking note of the poor data, she said she “wouldn’t want to jump to conclusions.”
However, she added: “It is clear that unseasonably cold weather has played some role.”
A week later, the US Fed Beige Book survey of regional economies, important content for the FOMC policy meeting, mentioned the weather 119 times in explaining sluggish activity in much of the country.
REBOUND
A modest rebound in retail sales data last month suggested that there is some pent-up demand, and analysts hope this month and next month will show a rebound in the economy.
“We expect catch-up in March, leading to good momentum heading in to the second quarter,” Jim O’Sullivan at High Frequency Economics said.
Yellen, who has always stayed behind the scenes during her three years as Bernanke’s deputy, will face the media on Wednesday when she announces the FOMC’s policy decision.
With the bond-buying taper expected to remain on track, the challenge will be to explain how the committee will adjust the communication of its expectations: essentially, how it signals to the market when it plans to begin raising its key interest rate, held at a rock-bottom zero to 0.25 percent since December 2008.
At the end of 2012, the FOMC set specific thresholds for when it could begin lifting the rate: 2 percent for inflation and a 6.5 percent unemployment rate.
Most policymakers did not think those levels would be breached until next year, and the current Fed outlook for a rate hike is later next year.
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
NEGOTIATIONS: Semiconductors play an outsized role in Taiwan’s industrial and economic development and are a major driver of the Taiwan-US trade imbalance With US President Donald Trump threatening to impose tariffs on semiconductors, Taiwan is expected to face a significant challenge, as information and communications technology (ICT) products account for more than 70 percent of its exports to the US, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) president Lien Hsien-ming (連賢明) said on Friday. Compared with other countries, semiconductors play a disproportionately large role in Taiwan’s industrial and economic development, Lien said. As the sixth-largest contributor to the US trade deficit, Taiwan recorded a US$73.9 billion trade surplus with the US last year — up from US$47.8 billion in 2023 — driven by strong
A proposed 100 percent tariff on chip imports announced by US President Donald Trump could shift more of Taiwan’s semiconductor production overseas, a Taiwan Institute of Economic Research (TIER) researcher said yesterday. Trump’s tariff policy will accelerate the global semiconductor industry’s pace to establish roots in the US, leading to higher supply chain costs and ultimately raising prices of consumer electronics and creating uncertainty for future market demand, Arisa Liu (劉佩真) at the institute’s Taiwan Industry Economics Database said in a telephone interview. Trump’s move signals his intention to "restore the glory of the US semiconductor industry," Liu noted, saying that
STILL UNCLEAR: Several aspects of the policy still need to be clarified, such as whether the exemptions would expand to related products, PwC Taiwan warned The TAIEX surged yesterday, led by gains in Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), after US President Donald Trump announced a sweeping 100 percent tariff on imported semiconductors — while exempting companies operating or building plants in the US, which includes TSMC. The benchmark index jumped 556.41 points, or 2.37 percent, to close at 24,003.77, breaching the 24,000-point level and hitting its highest close this year, Taiwan Stock Exchange (TWSE) data showed. TSMC rose NT$55, or 4.89 percent, to close at a record NT$1,180, as the company is already investing heavily in a multibillion-dollar plant in Arizona that led investors to assume
RSS