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You can find the current article at its original source at https://www.theguardian.com/business/live/2016/aug/26/all-eyes-on-yellen-as-jackson-hole-kicks-off-business-live
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| Janet Yellen: case for rate hike 'strengthened in recent months' – live | Janet Yellen: case for rate hike 'strengthened in recent months' – live |
| (35 minutes later) | |
| 5.19pm BST | |
| 17:19 | |
| Closing summary: Fed leaves door open to rate rise before year-end | |
| On that note, it’s time to close for the day. Thanks for all the comments, we will be back on Tuesday. | |
| 5.00pm BST | |
| 17:00 | |
| Here is CNBC’s report on its interview with Fed vice chair Stanley Fischer, who gave markets more to mull over when he highlighted the US economy’s recent strength. Hints that the Fed could raise rates as soon as next month, saw US stock markets erase earlier gains. | |
| 4.46pm BST | |
| 16:46 | |
| US stocks trim gains as Stanley Fischer highlights stronger economy | |
| Now Fed policymaker Stanley Fischer is talking about Janet Yellen’s speech, adding fuel to the debate over whether the US central bank could raise rates as soon as September. | |
| He has been speaking to CNBC and appears to be hinting a near-term rate rise is still on the table. The dollar is strengthening and US stocks have trimmed gains. | |
| No, the fed is not behind the curve says @federalreserve Vice Chair Stanley Fisher to @steveliesman. @CNBC pic.twitter.com/OnMxlB7aQq | |
| Fed's Fischer: Economy has strengthened, job report will weigh in on hike decision » https://t.co/tFy2V06GbF | |
| US markets paring gains as Fed's Fischer speaks exclusively w/ steveliesman in Jackson Hole https://t.co/dPyA6R72xE pic.twitter.com/2SttyKMSCy | |
| 4.27pm BST | 4.27pm BST |
| 16:27 | 16:27 |
| Here’s a rather unsympathetic assessment of how financial markets reacted to Janet Yellen’s speech from David Lamb, head of dealing a FEXCO Corporate Payments. He says traders are “unable to see their terminals for the egg on their faces”. | Here’s a rather unsympathetic assessment of how financial markets reacted to Janet Yellen’s speech from David Lamb, head of dealing a FEXCO Corporate Payments. He says traders are “unable to see their terminals for the egg on their faces”. |
| Lamb comments: | Lamb comments: |
| “The currency markets frequently live and die by the ‘shoot first and ask questions later’ motto. Today they were asking awkward questions just seconds after firing. | “The currency markets frequently live and die by the ‘shoot first and ask questions later’ motto. Today they were asking awkward questions just seconds after firing. |
| “No sooner had the Fed’s Chair uttered the magic words ‘the case has strengthened’ and trigger-happy traders were snapping up dollars in expectation of an near-immediate rate rise. | “No sooner had the Fed’s Chair uttered the magic words ‘the case has strengthened’ and trigger-happy traders were snapping up dollars in expectation of an near-immediate rate rise. |
| “But as the seconds ticked by, it became increasingly clear that a hike is inevitable, but not imminent. | “But as the seconds ticked by, it became increasingly clear that a hike is inevitable, but not imminent. |
| “Cue a huge correction that saw the dollar slump well below its pre-announcement levels – leaving many traders unable to see their terminals for the egg on their faces. | “Cue a huge correction that saw the dollar slump well below its pre-announcement levels – leaving many traders unable to see their terminals for the egg on their faces. |
| “The caveats came thick and fast. There’s a range of possible rate rise scenarios, they could still be blown of course, and the killer line – gradual hikes are appropriate.” | “The caveats came thick and fast. There’s a range of possible rate rise scenarios, they could still be blown of course, and the killer line – gradual hikes are appropriate.” |
| 4.14pm BST | 4.14pm BST |
| 16:14 | 16:14 |
| US stock markets are rallying in the wake of Janet Yellen’s speech, says Chris Beauchamp, chief market analyst at online trading company IG. | US stock markets are rallying in the wake of Janet Yellen’s speech, says Chris Beauchamp, chief market analyst at online trading company IG. |
| He believes Yellen opted to “please both hawks and doves”. | He believes Yellen opted to “please both hawks and doves”. |
| Beauchamp comments: | Beauchamp comments: |
| “The ‘Dip-buyers anonymous’ team is working at full steam this afternoon, as Janet Yellen finds the right tone to encourage investors to step back into the market at the end of a tedious week. Clearly a modest rise in rates is taken as a sign of confidence in the economy, while the passing reference to other policy measures being potentially necessary in future crises was viewed as leaving the door open to the kind of broader monetary stimulus practised by the European Central Bank and the Bank of Japan.” | “The ‘Dip-buyers anonymous’ team is working at full steam this afternoon, as Janet Yellen finds the right tone to encourage investors to step back into the market at the end of a tedious week. Clearly a modest rise in rates is taken as a sign of confidence in the economy, while the passing reference to other policy measures being potentially necessary in future crises was viewed as leaving the door open to the kind of broader monetary stimulus practised by the European Central Bank and the Bank of Japan.” |
| Looking ahead, he adds: | Looking ahead, he adds: |
| “Given the enthusiastic reception equity markets have given Janet Yellen, it looks like the steady grind higher will continue into the end of August.” | “Given the enthusiastic reception equity markets have given Janet Yellen, it looks like the steady grind higher will continue into the end of August.” |
| 4.07pm BST | 4.07pm BST |
| 16:07 | 16:07 |
| Andrew Hunter, US economist at the consultancy Capital Economics says Janet Yellen’s comments are “consistent with a US rate hike by year-end”. | Andrew Hunter, US economist at the consultancy Capital Economics says Janet Yellen’s comments are “consistent with a US rate hike by year-end”. |
| To re-cap, the Fed chair said the case for rate rises had strengthened, she rebuffed suggestions monetary policy had lost some of its power and made that now so familiar call from central bankers for fiscal policy to do its share of the heavy lifting. | To re-cap, the Fed chair said the case for rate rises had strengthened, she rebuffed suggestions monetary policy had lost some of its power and made that now so familiar call from central bankers for fiscal policy to do its share of the heavy lifting. |
| But there was little in the way of guidance on when US interest rates might rise and so markets were left doing a little dance that I would sum up - if readers will forgive the lack of sophistication - as “Oh no, rate hikes!!! Oh, hang on, as you were, nothing’s imminent.” In other words, the dollar rose and then the dollar fell. Stocks trimmed gains and then recovered. | But there was little in the way of guidance on when US interest rates might rise and so markets were left doing a little dance that I would sum up - if readers will forgive the lack of sophistication - as “Oh no, rate hikes!!! Oh, hang on, as you were, nothing’s imminent.” In other words, the dollar rose and then the dollar fell. Stocks trimmed gains and then recovered. |
| Hunter at Capital Economics says Yellen’s acknowledgement that “the case for an increase in the federal funds rate has strengthened” would appear to increase the likelihood of a near-term rate hike. | Hunter at Capital Economics says Yellen’s acknowledgement that “the case for an increase in the federal funds rate has strengthened” would appear to increase the likelihood of a near-term rate hike. |
| He continues: | He continues: |
| “On balance, however, we think most officials will want to see more concrete evidence of a rebound in GDP growth and a rise in inflation towards the 2% target, with a December move still appearing the most likely outcome. | “On balance, however, we think most officials will want to see more concrete evidence of a rebound in GDP growth and a rise in inflation towards the 2% target, with a December move still appearing the most likely outcome. |
| “In a fairly upbeat assessment of current economic conditions, Yellen acknowledged the recent strength of consumption, despite the weakness of GDP growth. She also highlighted that even that subdued pace of growth “has been sufficient to generate further improvement in the labour market”. However, she repeated the warning that the future path of monetary policy will depend on the incoming data.” | “In a fairly upbeat assessment of current economic conditions, Yellen acknowledged the recent strength of consumption, despite the weakness of GDP growth. She also highlighted that even that subdued pace of growth “has been sufficient to generate further improvement in the labour market”. However, she repeated the warning that the future path of monetary policy will depend on the incoming data.” |
| And on the consultancy’s view on when rates will rise, Hunter concludes: | And on the consultancy’s view on when rates will rise, Hunter concludes: |
| “Overall, along with the more upbeat tone of the recent data, we think the odds of a September rate hike have probably increased. They will increase further if we are right in forecasting that non-farm payrolls increased by a solid 180,000 in August (data due next Friday). Nonetheless, with real GDP expanding by just 1.2% over the past 12 months and inflation continuing to run below target, we still think most Fed officials will want to wait until December before next raising rates.” | “Overall, along with the more upbeat tone of the recent data, we think the odds of a September rate hike have probably increased. They will increase further if we are right in forecasting that non-farm payrolls increased by a solid 180,000 in August (data due next Friday). Nonetheless, with real GDP expanding by just 1.2% over the past 12 months and inflation continuing to run below target, we still think most Fed officials will want to wait until December before next raising rates.” |
| 3.59pm BST | 3.59pm BST |
| 15:59 | 15:59 |
| Here are some reassuring words for any readers struggling to make sense of today’s Jackson Hole speech from Janet Yellen. | Here are some reassuring words for any readers struggling to make sense of today’s Jackson Hole speech from Janet Yellen. |
| Our economics editor, Larry Elliott, says the Fed Chair’s address provided an opportunity for “Wall Street to play one of its favourite games: interpreting a speech by Janet Yellen.” | Our economics editor, Larry Elliott, says the Fed Chair’s address provided an opportunity for “Wall Street to play one of its favourite games: interpreting a speech by Janet Yellen.” |
| He writes: | He writes: |
| “Truly, in terms of making her pronouncements cryptic, the most powerful central banker in the world is the daughter and heir to her predecessor but one, Alan Greenspan. | “Truly, in terms of making her pronouncements cryptic, the most powerful central banker in the world is the daughter and heir to her predecessor but one, Alan Greenspan. |
| Nothing Yellen has come up with comes close yet to Greenspan’s “I know you think you understand what you thought I said but I’m not sure you realise that what you heard is not what I meant” but her presentation at the Jackson Hole symposium was a pretty good effort.” | Nothing Yellen has come up with comes close yet to Greenspan’s “I know you think you understand what you thought I said but I’m not sure you realise that what you heard is not what I meant” but her presentation at the Jackson Hole symposium was a pretty good effort.” |
| Full analysis following soon | Full analysis following soon |
| 3.49pm BST | 3.49pm BST |
| 15:49 | 15:49 |
| Rob Carnell, chief international economist at the bank ING says it was a speech full of caveats from Janet Yellen and that “a September rate hike remains awkward to sell to markets unless the inflation data start to move higher”. | Rob Carnell, chief international economist at the bank ING says it was a speech full of caveats from Janet Yellen and that “a September rate hike remains awkward to sell to markets unless the inflation data start to move higher”. |
| He has pulled out two main messages, and one sub-message, from the lengthy Jackson Hole speech. | He has pulled out two main messages, and one sub-message, from the lengthy Jackson Hole speech. |
| “The first of the main messages was that the economy has continued to improve and that made the case for a rate hike more likely in the months ahead. | “The first of the main messages was that the economy has continued to improve and that made the case for a rate hike more likely in the months ahead. |
| “But “more likely” does not mean “likely”, and markets are still reluctant to buy into a September rate hike story, at least without more information on the evolution of jobs growth, the pace of economic activity, or higher inflation. | “But “more likely” does not mean “likely”, and markets are still reluctant to buy into a September rate hike story, at least without more information on the evolution of jobs growth, the pace of economic activity, or higher inflation. |
| “The second message, which we suspect markets may also have problems accepting at face value, is that in the event of a return to crisis, more quantitative easing, coupled with “forward guidance” would likely provide sufficient stimulus to avert catastrophe (our words). This message might very well be filed under the heading of “Well, they would say that wouldn’t they.” | “The second message, which we suspect markets may also have problems accepting at face value, is that in the event of a return to crisis, more quantitative easing, coupled with “forward guidance” would likely provide sufficient stimulus to avert catastrophe (our words). This message might very well be filed under the heading of “Well, they would say that wouldn’t they.” |
| “But buried at the end of the speech, after a section that seemed to draw heavily on the recent paper by the San Francisco Fed President, John Williams’, Yellen proposed an enhanced role for fiscal policy. She talked about the need for measures designed to improve productivity (fiscal, not monetary), as well as enhancing (fiscal) automatic stabilisers. A cynic might paraphrase the speech as “Things are looking brighter, but if it all goes wrong don’t panic, there’s always fiscal policy”.” | “But buried at the end of the speech, after a section that seemed to draw heavily on the recent paper by the San Francisco Fed President, John Williams’, Yellen proposed an enhanced role for fiscal policy. She talked about the need for measures designed to improve productivity (fiscal, not monetary), as well as enhancing (fiscal) automatic stabilisers. A cynic might paraphrase the speech as “Things are looking brighter, but if it all goes wrong don’t panic, there’s always fiscal policy”.” |
| 3.42pm BST | 3.42pm BST |
| 15:42 | 15:42 |
| David Morrison, senior market strategist at Spreadco has been looking at that rollercoaster market reaction to the speech by Janet Yellen. | David Morrison, senior market strategist at Spreadco has been looking at that rollercoaster market reaction to the speech by Janet Yellen. |
| He comments: | He comments: |
| “Her speech was undeniably hawkish. She said the case for a rate hike has strengthened in recent months. Also, the US economy continues to expand and has reached maximum employment with price stability. This saw the dollar pop higher initially and precious metals fall. Nevertheless, she anticipates that gradual rate hikes are appropriate... | “Her speech was undeniably hawkish. She said the case for a rate hike has strengthened in recent months. Also, the US economy continues to expand and has reached maximum employment with price stability. This saw the dollar pop higher initially and precious metals fall. Nevertheless, she anticipates that gradual rate hikes are appropriate... |
| “But as is so often the case, the initial market reaction can be misleading. As traders scanned below the headlines for the meat in the speech, perceptions over Dr Yellen’s thinking changed. Gold and silver have surged as the dollar slumped. Possibly this is connected to her comments that the overall economic situation remains uncertain.” | “But as is so often the case, the initial market reaction can be misleading. As traders scanned below the headlines for the meat in the speech, perceptions over Dr Yellen’s thinking changed. Gold and silver have surged as the dollar slumped. Possibly this is connected to her comments that the overall economic situation remains uncertain.” |
| 3.37pm BST | 3.37pm BST |
| 15:37 | 15:37 |
| Janet Yellen has also used her speech to join the chorus of central bankers insisting they are not all out of ammunition. | Janet Yellen has also used her speech to join the chorus of central bankers insisting they are not all out of ammunition. |
| Her speech to the Jackson Hole meeting, entitled “The Federal Reserve’s Monetary Policy Toolkit: Past, Present, and Future”, unsurprisingly concludes that it’s a well-stocked and effective toolkit. | Her speech to the Jackson Hole meeting, entitled “The Federal Reserve’s Monetary Policy Toolkit: Past, Present, and Future”, unsurprisingly concludes that it’s a well-stocked and effective toolkit. |
| Yellen says: | Yellen says: |
| “Although fiscal policies and structural reforms can play an important role in strengthening the U.S. economy, my primary message today is that I expect monetary policy will continue to play a vital part in promoting a stable and healthy economy. New policy tools, which helped the Federal Reserve respond to the financial crisis and Great Recession, are likely to remain useful in dealing with future downturns. Additional tools may be needed and will be the subject of research and debate. But even if average interest rates remain lower than in the past, I believe that monetary policy will, under most conditions, be able to respond effectively.” | “Although fiscal policies and structural reforms can play an important role in strengthening the U.S. economy, my primary message today is that I expect monetary policy will continue to play a vital part in promoting a stable and healthy economy. New policy tools, which helped the Federal Reserve respond to the financial crisis and Great Recession, are likely to remain useful in dealing with future downturns. Additional tools may be needed and will be the subject of research and debate. But even if average interest rates remain lower than in the past, I believe that monetary policy will, under most conditions, be able to respond effectively.” |
| There are echoes of Bank of England governor Mark Carney, who shortly after the EU referendum said: “The charge that central banks are out of monetary ammunition is wrong, but the widespread absence of global price pressures demands that our firepower be well aimed.” | There are echoes of Bank of England governor Mark Carney, who shortly after the EU referendum said: “The charge that central banks are out of monetary ammunition is wrong, but the widespread absence of global price pressures demands that our firepower be well aimed.” |
| 3.30pm BST | 3.30pm BST |
| 15:30 | 15:30 |
| Also reacting to Janet Yellen’s speech at Jackson Hole, Lee Ferridge, head of multi-asset strategy at State Street Global Markets North America has shared this view: | Also reacting to Janet Yellen’s speech at Jackson Hole, Lee Ferridge, head of multi-asset strategy at State Street Global Markets North America has shared this view: |
| “Despite recent hints of an ongoing policy rethink at the FOMC [Federal Open Markets Committee], Janet Yellen’s Jackson Hole speech did not break much new ground. Her comments could help arrest the dollar’s recent decline and deal a blow to the rally in risky assets that we have seen in recent weeks. A move at the September meeting remains less likely but a move before year end now looks a distinct possibility should US data continue to improve.” | “Despite recent hints of an ongoing policy rethink at the FOMC [Federal Open Markets Committee], Janet Yellen’s Jackson Hole speech did not break much new ground. Her comments could help arrest the dollar’s recent decline and deal a blow to the rally in risky assets that we have seen in recent weeks. A move at the September meeting remains less likely but a move before year end now looks a distinct possibility should US data continue to improve.” |
| 3.28pm BST | 3.28pm BST |
| 15:28 | 15:28 |
| Some more reactions coming in to Janet Yellen’s speech now, which as we noted earlier left the markets in a bit of a muddle. | Some more reactions coming in to Janet Yellen’s speech now, which as we noted earlier left the markets in a bit of a muddle. |
| The dollar initially strengthened as the Fed chair hinted at further rate rises but then lost those gains, possibly as the timing of any such tightening seems to be some way off. Similarly, stock markets initially trimmed gains on the prospect of higher interest rates and then rose again when traders had digested Yellen’s remarks and decided it was too soon to worry. | The dollar initially strengthened as the Fed chair hinted at further rate rises but then lost those gains, possibly as the timing of any such tightening seems to be some way off. Similarly, stock markets initially trimmed gains on the prospect of higher interest rates and then rose again when traders had digested Yellen’s remarks and decided it was too soon to worry. |
| Aberdeen Asset Management fixed income investment manager James Athey comments: | Aberdeen Asset Management fixed income investment manager James Athey comments: |
| “While the bulk of Yellen’s opening remarks at Jackson Hole focussed on monetary policy over the long term, she stated that in her opinion the case for a rate hike has strengthened in recent months. But the lack of any specific signal with regards to the September meeting means markets are unlikely to react adversely to this fairly throwaway comment. Yellen’s comments were largely focussed on the debate around the effectiveness of the Fed’s toolkit. | “While the bulk of Yellen’s opening remarks at Jackson Hole focussed on monetary policy over the long term, she stated that in her opinion the case for a rate hike has strengthened in recent months. But the lack of any specific signal with regards to the September meeting means markets are unlikely to react adversely to this fairly throwaway comment. Yellen’s comments were largely focussed on the debate around the effectiveness of the Fed’s toolkit. |
| “Of course she defended the success of previous policy and indeed the ability of the Fed to respond effectively in the future, however she wasn’t shy of highlighting the need for government to assist in the heavy lifting through the use of supportive fiscal policy – a plea we regularly hear from ECB President Mario Draghi. | “Of course she defended the success of previous policy and indeed the ability of the Fed to respond effectively in the future, however she wasn’t shy of highlighting the need for government to assist in the heavy lifting through the use of supportive fiscal policy – a plea we regularly hear from ECB President Mario Draghi. |
| “However the elephant in the room is that the Fed may well be worshipping at a false idol. There’s more and more evidence to show that inflation just isn’t behaving in the way that economists think it should. The Fed should stop targeting consumer inflation and start looking at a wider suite of measures to judge the health of the economy and the appropriateness of their policy. Sadly it looks like the wide open plains of Wyoming have not inspired any soul searching.” | “However the elephant in the room is that the Fed may well be worshipping at a false idol. There’s more and more evidence to show that inflation just isn’t behaving in the way that economists think it should. The Fed should stop targeting consumer inflation and start looking at a wider suite of measures to judge the health of the economy and the appropriateness of their policy. Sadly it looks like the wide open plains of Wyoming have not inspired any soul searching.” |
| 3.17pm BST | 3.17pm BST |
| 15:17 | 15:17 |
| So it’s a hawkish message from Yellen, but is she telling us anything we didn’t know already? | So it’s a hawkish message from Yellen, but is she telling us anything we didn’t know already? |
| Well, markets appear to be struggling to make sense of the message from Yellen. US stocks initially trimmed gains only to rise again. The dollar has now reversed its initial gains against the pound and euro. | Well, markets appear to be struggling to make sense of the message from Yellen. US stocks initially trimmed gains only to rise again. The dollar has now reversed its initial gains against the pound and euro. |
| Here are some of the early reactions (including from UK commentators, who are counting down to a long weekend with a public holiday on Monday): | Here are some of the early reactions (including from UK commentators, who are counting down to a long weekend with a public holiday on Monday): |
| Main headlines hawkish initially but she's not really saying anything new. #FOMC #Yellen | Main headlines hawkish initially but she's not really saying anything new. #FOMC #Yellen |
| Therefore weekend starts here | Therefore weekend starts here |
| Janet Yellen: Case for a rate hike has strengthened in recent months. #jacksonhole. Dollar strengthened. 2, 5, 10 year yield rising. | Janet Yellen: Case for a rate hike has strengthened in recent months. #jacksonhole. Dollar strengthened. 2, 5, 10 year yield rising. |
| A Hawkish Yellen Surprises Markets: "The Rate Hike Case Has Strengthened In Recent Months" https://t.co/wWEtcduIEp | A Hawkish Yellen Surprises Markets: "The Rate Hike Case Has Strengthened In Recent Months" https://t.co/wWEtcduIEp |
| #Yellen quick take : case for rate hike strengrhened, lots of similar stuff to Dudley, Fischer; refutes idea Fed out of ammo... -> | #Yellen quick take : case for rate hike strengrhened, lots of similar stuff to Dudley, Fischer; refutes idea Fed out of ammo... -> |
| @MOstwald1 #Yellen if Fed needs to ease in new downturn, can do more QE, buy different / more stuff with it -> market sees +QE and whoopees | @MOstwald1 #Yellen if Fed needs to ease in new downturn, can do more QE, buy different / more stuff with it -> market sees +QE and whoopees |
| 3.07pm BST | 3.07pm BST |
| 15:07 | 15:07 |
| Those remarks on a stronger case for rate hikes in the US have seen US stock markets trim some of their gains and pushed the dollar up against the euro and pound. | Those remarks on a stronger case for rate hikes in the US have seen US stock markets trim some of their gains and pushed the dollar up against the euro and pound. |
| This key extract from the speech shows Janet Yellen and her fellow policymakers are still keen to come across as avid data watchers, but she clearly sees a better case for rate rises: | This key extract from the speech shows Janet Yellen and her fellow policymakers are still keen to come across as avid data watchers, but she clearly sees a better case for rate rises: |
| “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook,” she said. | “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook,” she said. |
| 3.04pm BST | 3.04pm BST |
| 15:04 | 15:04 |
| Yellen says case for rate hikes "strengthened in recent months" | Yellen says case for rate hikes "strengthened in recent months" |
| Yellen has told her audience at Jackson Hole that the case for raising US interest rates has strengthened in recent months. | Yellen has told her audience at Jackson Hole that the case for raising US interest rates has strengthened in recent months. |
| She cited improvements in the jobs market and hopes for modest GDP growth. | She cited improvements in the jobs market and hopes for modest GDP growth. |
| Here is the full speech. | Here is the full speech. |