2017 Economic Calendar
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Fed Chair Speech  
Released On 2/14/2017 10:00:00 AM For 2/14/2017 10:00:00 AM

Janet Yellen is sticking to the Fed's data-dependent script, saying further rate hikes will be based on how the economy unfolds. In prepared testimony to the Senate Banking Committee, she said further gradual hikes in the federal funds rate would be "appropriate" should employment and inflation move in line with expectations. And in a hawkish note, she warned again that waiting too long to hike rates would be "unwise" and would pose the risk of future imbalances and possible recession. Yellen, however, did not specifically mention the March 14-15 FOMC meeting for the next rate hike.

Though she did not offer any details on unwinding the Fed's balance sheet in her prepared remarks, in questions and answers she said she wants normalization to be well underway and the economy "solid" before ending reinvestment. In the long run, she expects the balance sheet to be substantially smaller than it is now and consist of all Treasuries, in a remark that highlights the Fed's large ongoing holdings of mortgage-backed securities. And in notes on policy strategy, she wants the Fed's portfolio to be runoff gradually and she warned against using balance sheet fluctuations as a monetary policy tool.

On fiscal policy and the prospect of increased stimulus under the Trump administration, she repeated that it's still "too early" to know the impact of future changes and she repeated that fiscal policy is only one factor of many that affect Fed policy. Yellen did, however, suggest that fiscal policy should concentrate on long-term improvement in the nation's growth.

Her economic comments are mildly upbeat saying the U.S. economy should continue to expand at a moderate pace and that the pace of global economic activity should pick up over time. She said wage growth is improving but ultimately depends on productivity which she once again described as depressed. On the labor market, she cited further improvement but said the pace of job growth is currently higher than what is sustainable in the long run. She noted that labor market slack has diminished despite slow GDP growth. On the consumer, she said spending is doing well and is helping to support the housing sector. Demand for bonds has eased with the dollar slightly firmer in reaction to her testimony.

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