Here's What Analysts Expect From Yellen's Speech Today

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After a disappointing May labor market report on Friday, all eyes are on Federal Reserve Chair Janet Yellen, who is expected to deliver her view on the economic outlook and monetary policy at the World Affairs Council of Philadelphia.

Chair Yellen is set to provide additional clarification regarding whether a rate hike is still appropriate in the "coming months." Apart from the speech itself, some hints are expected to pop up later during the questions and answers part of the event.

Here is what analysts at major commercial and investment banks think:

  • Goldman Sachs - "Going through recent Fed speak, we expect Yellen to stay on message today, and, although recent data argue for the Fed to stay on hold in June, dollar bulls should take comfort that the Fed is not more dovish, but just looking at the data."
  • RBC - "a June hike is completely at odds with even a modest modicum of Fed risk management."
  • JP Morgan - "Fed is out for June, a July move requires activity to rebound smartly."
  • TD Securities - "Yellen to strike a relatively balanced tone, while arguing for caution on the conduct of monetary policy. And even though Yellen should remain non-committal to a near term hike, she is likely to repeat he reference that "a rate hike in the coming months may be appropriate." The underlying tone of Yellen's message should reinforce our current base-case for the Fed to stay on the sidelines until September, when a clearer picture on US growth, inflation, the labor market and global risks emerge."
  • Bank of America Merrill Lynch - "Most labor slack measures are consistent with 2005, the last time we reached full employment. Participation is an exception. Wage inflation seems to be inching higher, suggesting the economy has hit or dropped below full employment. The Fed wants to hit or exceed its inflation target before the next recession, responding slowly to signs of labor pressures."
  • Barclays - "The current slowdown in retail sales is almost entirely the result of price effects. Falling energy prices, recent dollar appreciation, and tepid domestic price pressures have led to a substantial decline in the price of retail goods" - after price effects, sales are higher.

source

 

Yellen Q&A: Focus is not just on the next couple of quarters

Q&A underway

  • Takes its mandate and objectives from Congress.
  • Some dissent is to be expected in this complex economy
  • Looking to achieve consensus on Monetary policy
  • Has always backed FOMC decisions as fed chair
  • Uncertain on what is normal rates. The current level of normal rates is pretty low
  • Yellen believes neutral rates to rise over time
  • No preset plan on rates. Difficult to provide precise guidance
  • Best we can do is explain what factors guide rate path
  • We constantly have to be reacting to new data
  • Refrains from commenting on Donald Trump implications. Q&A ends.
Overall:
The dollar fell modestly. 
The 2 year is at 0.799%/10 year at 1.7246% - down modestly
The S&P is up 0.43% Nasdaq is up 0.51% - up modestly
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