Yellen Seems Cautious About Making Big Monetary Policy Changes

Federal Reserve Chair Janet Yellen often speaks on monetary policy—and lately more often than usual—and when she seeks new regulation, she usually delivers. This week, though, she seems to have been remarkably quiet on such things, causing the data released this week to be uncharacteristically light on investment statistics.

This week, Yellen has decided to remain mute on interest rates and balance sheets, leaving many investors in the dark about the moves they should be making. And this has led to a steady stock market.

And investors don’t necessarily like that: when there is no movement, it is harder to anticipate which stocks are going to outperform and which will fall.

With that in mind, then, experts might advise that you should look, instead, at the 10-year Treasury bond yield. These numbers did make a bit of a shift after Yellen’s speech, this week, though the jump was still not that significant: Early in the day they skirted around 2.2 percent, falling later to 2.17 percent which is still not that far above the 2.12 percent we saw back in June.

But her choice of inaction might still have had quite an impact in some ways. For one, the dollar fell against both the euro and the pound after her monetary-policy-absent oration. This pushed the dollar back down, below 93, nearing its lowest value of the year. Looking at that matter alone, then, it might seem that this is not the prime environment investors tend to seek.

Sure enough, the futures market reflects this environment. Equally sure: the odds we will see an interest rate hike by the end of this year continues to hold below 40 percent towards the end of the week.

Looking forward, unfortunately, this very same futures market is probably going to remain unchanged in September. On that note, the Fed might now need to prepare to address the balance sheet, as many will be looking for some guidance. While this is certainly not the answer that investments will want to hear, the data will need to be ready for those who seek some kind of guidance at all.

Aside from PCE prices for the week, August’s payrolls will be out this week, too—perhaps the only information that is going to be available right now. We do know that that the US economy added 209,000 new jobs in July after 231,000 in June.

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