Yellen: Inflation shortfall this year is a mystery

by | September 20th, 2017, 18:47:07 | Central Banks, Fed, FOMC

Into the Q&A

  • We take our mandate on maximum employment very seriously
  • Pleased and heartened by labour market progress
  • Unemployment rate is actually at a quite low level
  • Slack in labour market has largely disappeared
  • Inflation running below 2.0% is a concern

the problem the Fed has is that the strong jobs market should have lead to stronger wages and thus growth. At the moment, wages aren’t playing ball and that’s puzzling the Fed.

  • Persistent inflation shortfall will impact mon pol
  • Must be careful not to let the economy overheat
  • It’s not easy to get a clear read in asset price implications (i.e “we don;t have a clue”)
  • We are taking account of movements in asset prices
  • Significant shock could push us to the lower bound

For the record, and as per my preview, I’m long cable at 0.3495 and 1.3475. I’m going to hold it for a while to see how the presser plays out and the reaction in the dollar once it’s over. If USDJPY breaks 112.50, I’ll reassess.

  • Inflation expectations are rock solid on some gauges
  • Low inflation is 2017 doesn’t mean it will continue
  • We must judge if low inflation is transitory (I thought she said earlier that is was?)
  • Has not had a further meeting with Trump after earlier meetings
  • No comment further ion intentions on whether she wants to stay on as Fed chair

 

 

Ryan Littlestone
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