Yellen’s appearance was itself a source of controversy.
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Janet Yellen got up this morning, looked at her schedule, presumably made a decision to have a few mimosas, and then dragged herself before the U.S. House of Representatives to answer mostly awful questions about the economy.
Rep. Jeb Hensarling of Texas, who heads the committee, struck a combative tone from the start of the hearing, criticizing Yellen for the lack of transparency in developing the new regulations, many of which were required under Dodd-Frank. Yellen said in late September that she and most other policy makers “anticipate that it will likely be appropriate to raise the target range for the federal-funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labor market improves further and inflation moves back to our 2% objective”.
The group includes the eight largest banks in the United States, a number of major foreign banks operating in the United States and several large institutions that have been judged systemically important.
“Has the Fed crossed the line from being regulator to manager?”
“Potentially anything – including negative interest rates – would be on the table”.
Euro-zone bonds also rose on Draghi’s comments in Frankfurt that the central bank would review the amount of stimulus needed to stoke the economy at its December meeting. As a matter of fact, that’s why we call it Fall. Nor is it God’s plan for things to rise in the winter, throug the snow. “And so if you want to be good with the Almighty, you may want to delay until May”. This would happen if the economy were to “deteriorate in a significant way”, she said, adding that she believed negative rates “would have a few at least modest favorable effect on banks’ incentives to lend”. Meanwhile, the job market is gaining strength. If the economy continues to chug along as expected, Yellen said Fed officials will debate whether to raise rates for the first time in almost a decade. The Fed last week turned over almost 4,000 pages of documents to lawmakers after months of resistance.
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Prior to Yellen’s testimony, the dollar was already higher on encouraging domestic data in particular from a private report that showed a surprise improvement in the vast US services sector.
