18 July 2017
Bassanese Bites: Fed turns dovish (again!) – Week beginning: 17 July 2017
Whether she meant to or not, Federal Reserve chair Janet Yellen struck a dovish tone in testimony last week, with markets particularly salivating over her comment that “the federal funds rate would not have to rise all that much further to get to a neutral policy stance.” Stocks rallied and bond yields and the $US fell. The $A surged higher, much to the likely annoyance of the RBA.
So, are we almost done with US rate hikes?
Reading Yellen’s speech in full places the comment in a broader context. While she does suggest that the neutral rate is “currently low” – due to temporary factors – she goes on to concede it is likely to rise over time, suggesting “additional gradual rate hikes are likely to be appropriate over the next few years.” Such nuances, however, were lost on the market.
That said………………….
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