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14 Nov 2013
Markets buoyed by the prospect of continuing Fed dovishness
FXstreet.com (London) - Markets have been buoyed this morning by the prospect of more of the same from the Fed under Janet Yellen’s guidance.
In prepared comments released yesterday by the Federal Reserve ahead of her confirmation hearing before the Senate Committee on Banking, Housing, and Urban Affairs, Yellen strikes a predictably dovish tone, with a notable focus on oval unemployment levels over non-farm job creation. This focus may pare bets on a December taper. While the last non-farm payroll print jumped to 204k, the overall unemployment rate rose from 7.2 to 7.3 percent.
“We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time.”
Yellen adds: “For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases.”
The final line of Yellen’s penultimate paragraph gave markets exactly what they were looking for: “I believe the Federal Reserve has made significant progress toward its goals but has more work to do.”
The S&P is up 0.81 percent to 1,782.00 while the Dow is up 0.45 percent to 15,821.63 on increased expectations of continuing liquidity support from the Fed.
In prepared comments released yesterday by the Federal Reserve ahead of her confirmation hearing before the Senate Committee on Banking, Housing, and Urban Affairs, Yellen strikes a predictably dovish tone, with a notable focus on oval unemployment levels over non-farm job creation. This focus may pare bets on a December taper. While the last non-farm payroll print jumped to 204k, the overall unemployment rate rose from 7.2 to 7.3 percent.
“We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time.”
Yellen adds: “For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases.”
The final line of Yellen’s penultimate paragraph gave markets exactly what they were looking for: “I believe the Federal Reserve has made significant progress toward its goals but has more work to do.”
The S&P is up 0.81 percent to 1,782.00 while the Dow is up 0.45 percent to 15,821.63 on increased expectations of continuing liquidity support from the Fed.