For Fed Chair Yellen, Silence Is Calculated

When Fed Chair Janet Yellen steps to the podium for her post-meeting conference on Thursday, it will amount to the first words from the world’s most powerful financial leader in 63 days.

Over the period of extended silence—including a notable no-show by the chair at a Fed gathering in Jackson Hole, Wyoming—investors have digested (or, rather, indigested) escalating economic weakness in China, a global downdraft in commodity prices and violent stock market swings.

And that is not to mention persistent and deep-seated doubt over what the Fed will do on Thursday despite a commitment to transparency from the central bank.

What’s clear is that the silence is calculated. If Yellen had wanted to send a clear signal, she would have no trouble making her views known. It is also clear is that she presides over a committee that is divided on the issue of raising rates. After a series of ferocious market swings, New York Fed President Bill Dudley said he found the case for a September rate hike “less compelling.” Several days later, Fed Vice Chairman Stanley Fischer, in a CNBC interview, suggested in no uncertain times that September was very much in play.

And Yellen said nothing.

Letting deputies duke it out is textbook leadership. It gives the chair flexibility. But eventually, the chair has to step in to break the tie. The problem is that some see Yellen’s silence as sending a message. The failure of Yellen to weigh in, observers say, points to no imminent rate hike since she would have prepared markets for the increase.


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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.