Yesterday, Janet Yellen spoke in front of Congressional leaders amid the release of the US GDP data, which as expected, climbed to 3-year high. The end of Yellen’s mandate is near as the current Fed Chair is going to be replaced next year by Jerome Powell.
Janet Yellen said in her speech that the central bank does not want to “let growth get out of hands”. The Fed certainly prefers the debt to get out of hands. That was a very ironic statement from the US private bank’s chair. Yellen also mentioned that while she did not want to promise a rate hike in December, she will continue to act towards a normalization of the monetary policy. Markets are pricing in a rate hike for December.
So Yellen, as usual, keeps on being cautious regarding the rate path. It has been years that Fed officials are either “patient” or in “wait-and-see mode”. Central bankers declare that raising rates too soon could push the economy into recession. We rather believe that the Fed is unable to raise rates above a certain level or the bond bubble will likely burst. This is why we should see the Eurodollar climbing higher. In addition the short-term decline in gold is likely temporary as we believe that the Fed will have a hard time to deliver in 2018 and beyond.
By Yann Quelenn