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.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
As they zigzagged from one machine to another in the searing African sun, the workers were covered in black soot. However, the charcoal they were making is known as “green,” and backers hope it can save impoverished Chad from rampant deforestation. Chad, a vast, landlocked country of 19 million people perched at the crossroads of north and central Africa, is steadily turning to desert. It has lost more than 90 percent of its forest cover since the 1970s, hit by climate change and overexploitation of trees for household uses such as cooking, officials say. “Green charcoal” aims to protect what
RSS