In individual stocks, chip maker Intel led the action on the Dow blue chip list, gaining 1.2 percent.
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Deep in the speech, thrown out as nearly a side note, was something incredible: Yellen wondered aloud whether purchasing a wider range of assets – such as equities like the Bank of Japan or corporate bonds like the European Central Bank – would be something the Fed may need to consider in the future. “I think that’s something they wouldn’t want to deal with”.
U.S. Treasuries slumped as investors evaluated whether the Fed is likely to raise rates in September.
“Our decisions always depend on the degree to which incoming data continues to confirm the [Fed’s] outlook”, Dr Yellen said.
The US Federal Reserve has suffered stinging criticism in recent months for a perceived lack of coherence in its public positions on monetary policy, and markets had eagerly awaited her speech for some policy clarity.
She noted the US economy continues to expand, “led by solid growth in household spending”. The Fed had an ideal chance to raise rates in 2013 or 2014 as the economy emerged from recession. The market continues to assign roughly 60% chance to a December rate hike, which we feel is appropriate given the potential for an increase in uncertainty heading into the election.
Making its first hike in almost a decade, the US Federal Reserve raised rates last December, but has avoided further increases so far this year owing to the continuing global economic slowdown and volatility in major financial markets.
As Federal Reserve officials gathered here in Jackson Hole to plot the next steps for America’s economy, some members of the Fed-Up Coalition of community and labor groups spoke of their financial struggles.
With the impact of monetary policy muted in its short-run effect on growth, and governments globally leaving a vacuum on longer-term issues like better fiscal and productivity policies, central bankers are struggling over whether and how to step into a different, long-term role. The price of crude is trading at $46.77 after Organization of the Petroleum Exporting Countries (OPEC) optimism about a possible oil freeze was deflated after the comments from the Saudi Energy Minister who played down the possibility of a freeze and rather focused on a pick up in demand that is imminent only to OPEC members.
Yellen’s speech on Friday notwithstanding, not everyone is convinced a rate hike is coming soon.
That’s a very direct statement – unusually so for the Fed leader.
Yellen’s remarks are “wide open for interpretation, ” said Ryan Sweet, director of real-time economics at Moody’s Analytics.
A wider speculation of the Fed turning back to loosening monetary conditions is gaining prominence in many market participants’ minds, expecting either negative interest rates policies (NIRP), helicopter money, or a return of zero interest policies coupled with a yet another round of monetary easing (Fed’s bond-buying program, wrapped up in 2013-2014).
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Still, “both from a fundamental perspective and from a Fed policy perspective, the lows in longer-dated oil prices are likely behind us”, he said.
