Perspectives Blog

What to expect from Janet Yellen’s testimony

Zach Pandl, Portfolio Manager and Strategist | February 10, 2014

Yellen’s testimony before U.S. lawmakers will help clarify how she plans to govern the committee Some investors are expecting a meaningful change in direction from the Yellen Fed We look at four reasons why we anticipate continuity with the Bernanke regime After a few bewildering weeks with Nicolas Maduro and Erdem Basci, I can’t be the only one grateful to be turning attention back to Janet Yellen. The new Federal Reserve Board Chair will mak…

Yellen at Jackson Hole

Zach Pandl, Portfolio Manager and Strategist | August 25, 2014

At last week’s Jackson Hole Symposium Janet Yellen was not the dove we thought we knew. Balanced remarks on labor market and cumulative progress toward recovery put her views close to center of FOMC. We see this as further confirmation that Fed leadership is increasingly comfortable with moving toward an exit from zero interest rates—likely by June 2015 or a bit sooner. I must have heard it on the radio recently, because Janet Yellen’s speech…

U.S. rates — View update

Zach Pandl, Portfolio Manager and Strategist | April 4, 2014

…he credibility of the Fed’s forward guidance—are unchanged. However, we are now less confident about how to read Yellen’s policy strategy. Combined with the marked flattening of the curve year-to-date, this has lowered our conviction that 3-5yr rates will continue to underperform. We hope to get more clarity on the policy strategy in the FOMC minutes released next Wednesday and from Janet Yellen’s remarks to the New York Economic Club on April 16…

A question for Jackson Hole

Zach Pandl, Portfolio Manager and Strategist | August 20, 2014

…tivity of the funds rate to slack would be smaller when targeting broad measures of labor market slack. We think Janet Yellen’s July Humphrey-Hawkins testimony offered a hint about how Fed officials might be incorporating the underemployment issue into policy discussions in practice. In response to a question about the size of the output gap, Yellen offered the following: “The unemployment rate is 6.1 percent; members of our participants in the F…

Dovish feathers showing through

Zach Pandl, Portfolio Manager and Strategist | April 14, 2014

…ization. In reality, there is a big subjective component. Here’s what we wrote about this issue in our primer on Janet Yellen: “By and large Fed officials agree on their goals for the economy over the longer run … Where they disagree is on what should happen between now and then: how costly is high unemployment; what are tolerable paths for bringing inflation and unemployment back to normal levels; how aggressively should the Fed work to achieve…

U.S. rates – An intriguing six point three

Zach Pandl, Portfolio Manager and Strategist | June 9, 2014

…erhaps put renewed emphasis on wages as well. For instance, a recent paper by economist Andrew Levin (previously Janet Yellen’s chief of staff) puts the degree of broad labor market slack at around 5.5 million full-time equivalent workers (see figures 1 and 2; these are our estimates using Levin’s methodology). Although FOMC members frequently talk about cyclical weakness in labor force participation and slack in hours worked, they rarely provide…

What investors should know about Fed forward guidance

Zach Pandl, Portfolio Manager and Strategist | March 24, 2014

…the market’s heavy reliance on Summary of Economic Projections (SEP) forecasts to fade over time. Last week, at Janet Yellen’s first meeting as Fed Chair, the FOMC revised its forward guidance for the funds rate, dropping its reference to 6.5% unemployment and instead stressing the committee’s qualitative assessment of the economy. The change was a symbolically important step, but did not alter the broader outlook for policy rates, in our view….