Janet Yellen Testimony to Hint of Fed’s Next Move

Things looked so clear back in mid-December. The Federal Reserve raised its benchmark interest rate from record lows, and it signaled the likelihood of four more hikes in 2016.

That was then.

Panicky financial markets, global weakness and slumps in key U.S. economic sectors have since clouded the outlook for more rate increases. Friday’s jobs report for January further complicated things. It showed more pay for workers and rising confidence among job seekers.

So are further Fed rate hikes coming soon? No one seems sure. But as Chair Janet Yellen addresses Congress this week, most analysts and investors think the Fed will raise rates fewer than four times this year, if at all.

On Wednesday, Yellen will outline the Fed’s outlook in the first of two days of semiannual testimony. It’s unclear how much she’ll say about the likely timetable for rate increases. She and other Fed officials have stressed that their decisions remain “data dependent” — that is, hinge largely on the latest economic data.

Much of that data has been tepid since the Fed raised rates in December for the first time in nearly a decade. Manufacturing has slumped. Corporate profits are down. Business stockpiles are up. Shrunken oil prices have squeezed energy companies. Weakness in China and other emerging economies has rattled investors.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza