[VIDEOS] Fed's Yellen: Remain on track to raise rates this year if economy evolves as expected

Federal Reserve Chair Janet Yellen appeared before the House Financial Services Committee on Wednesday to deliver a monetary policy report.

In her prepared testimony released earlier, she said the U.S. has made progress, but labor market conditions are "not yet consistent" with maximum employment. Still, Yellen reiterated earlier comments that the Fed remains on track to raise rates this year—as long as the economy evolves as expected.

As the hearing began, Yellen was immediately put on the defensive. House Financial Services Committee Chairman Jeb Hensarling, R-Texas, called for more oversight and accused the Fed of flouting the law by ignoring requests for key documents. "The Fed's refusal to cooperate in a congressional investigation threatens both its reputation and its credibility. The Fed is not above the law," he said.

The most heated exchange of the day came when Rep. Sean Duffy, R-Wis., accused the Fed and Yellen of willfully quashing that Congressional leak probe. You can read about that here.

Via: CNBC

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[VIDEO] Yellen urges Congress to be wary of Fed reforms

Federal Reserve Chairwoman Janet Yellen urged lawmakers to tread lightly when it comes to overhauling the central bank, warning that proposed changes could undermine its ability to support the economy.

In prepared testimony, Yellen will tout the Fed’s own efforts to boost its transparency as a way to discourage lawmakers from pushing their own proposals to bring the Fed under stricter oversight.

“Efforts to further increase transparency, no matter how well intentioned, must avoid unintended consequences that could undermine the Federal Reserve's ability to make policy in the long-run best interest of American families and businesses,” she said.

Yellen’s testimony Wednesday before the House Financial Services Committee will come one day after that panel held a hearing in which Republicans blasted the Fed as being unaccountable.

While Yellen will argue in her testimony that Fed tweaks could subject the central bank to political pressure and make it less effective, GOP lawmakers have argued the Fed holds up its political independence as a way to avoid scrutiny.

“The Fed’s clamor for independence is its underpinning for circumventing any sort of congressional accountability,” said Rep. Sean Duffy (R-Wis.) on Tuesday.

The relationship between the Fed and Republicans has been touchy ever since the Fed embarked on an unprecedented run of monetary stimulus following the recession. But the dynamic took a turn for the worse recently, as the Fed has refused to comply with demands for documents lawmakers seek in conjunction with a probe into a 2012 leak of sensitive Fed information.

The Financial Services panel went so far as to issue subpoenas for some documents, at which point the Fed refused to provide them, citing an ongoing criminal probe into the matter by the Department of Justice.

Via: The Hill

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Fed holds off on interest rate hike, downgrades economic forecast

The Federal Reserve downgraded its view of the U.S. labor market and economy on Wednesday in a policy statement that suggested the central bank may have to wait until at least the third quarter to begin raising interest rates.

The Fed's statement put in place a meeting-by-meeting approach on the timing of its first rate hike since June 2006, making such a decision solely dependent on incoming economic data.

The data, however, have been getting worse. Just hours before the Fed's statement, the U.S. government reported that first-quarter gross domestic product came in much weaker than expected.

The central bank acknowledged that growth had slowed in the winter months, a dimmer assessment of the economy than its view in March. And while it said the poor performance was in part due to transitory factors, it pointed to soft patches across the economy, in a sign it may have to hold off hiking rates until at least September.

"The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term," the Fed said in its statement, following a two-day meeting of its policy-setting committee.

U.S. Treasury yields added to earlier gains and short-term interest-rate futures contracts dropped slightly after the Fed statement before paring the losses. Futures traders continue to bet the Fed will wait until December to raise rates, and give an October rate rise just a 46 percent chance, according to CME FedWatch.

Via: Reuters

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A Return to Keynes?

The nomination of Janet Yellen to become head of the Federal Reserve System has set off a flurry of media stories. Since she will be the first woman to occupy that position, we can only hope that this will not mean that any criticism of what she does will be attributed to sex bias or to a "war on women."

The Federal Reserve has become such a major player in the American economy that it needs far more scrutiny and criticism than it has received, regardless of who heads it.

Ms. Yellen, a former professor of economics at Berkeley, has openly proclaimed her views on economic policy, and those views deserve very careful scrutiny. She asks: "Will capitalist economies operate at full employment in the absence of routine intervention?" And she answers: "Certainly not."

Janet Yellen represents the Keynesian economics that once dominated economic theory and policy like a national religion -- until it encountered two things: Milton Friedman and the stagflation of the 1970s.

At the height of the Keynesian influence, it was widely believed that government policy-makers could choose a judicious trade-off between the inflation rate and the rate of unemployment. This trade-off was called the Phillips Curve, in honor of an economist at the London School of Economics.

Professor Milton Friedman of the University of Chicago attacked the Phillips Curve, both theoretically and empirically. When Professor Friedman received the Nobel Prize in economics -- the first of many to go to Chicago economists, who were the primary critics of Keynesian economics -- it seemed as if the idea of a trade-off between the inflation rate and the unemployment rate might be laid to rest.

Via: TownHall

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Janet Yellen to be named Fed chair on Wednesday: White House

After months of speculation, it's official: Janet Yellen will be the next chair of the Federal Reserve, succeeding Ben Bernanke, the White House said late Tuesday.

President Obama will make the announcement on Wednesday at 3pm ET, the White House said. Both Janet Yellen and current Fed chair Ben Bernanke are expected to attend. That announcement will be right after the Fed releases the minutes from its last meeting, due out at 2pm ET.

Dow and S&P futures shot higher following the announcement, pointing to a higher open on Wall Street Wednesday.

What are futures doing now? Click here for the latest futures action.

"Markets are giving Yellen the thumbs up, counting on quantitative easing being maintained at full pace until further notice," Sean Callow, senior currency strategist at Westpac in Sydney, told Reuters after the announcement.

Andrew Harrer | Bloomberg | Getty Images

"It's a notable reaction given Yellen's nomination was so widely expected and that it comes at a time markets are already assuming the Federal Open Market Committee will not seriously consider a policy change at the October meeting given the fiscal standoff."

Yellen is seen as a dove on monetary policy, favoring strategies that bring down unemployment even at the risk of driving inflation higher. She has said she does not believe there is often conflict between the two Fed goals.

Via: CNBC

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