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.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam