Advertisement

Has Fed turned hawkish or did Yellen misspeak?

Although not much has changed in the economy, the US central bank sees rates rising faster

Reading Time:3 minutes
Why you can trust SCMP
Fed chairman Janet Yellen says interest rates may be left unchanged if inflation in the US remains at a low level. Photo: MCT

The Federal Reserve is telling us that not much has changed in the economy in the United States except rates are going to rise faster.

Advertisement

That is either growing hawkishness or a communications flub by Fed chairman Janet Yellen in her first Federal Open Market Committee press conference.

Wednesday's FOMC announcement did not change much in terms of the Fed's economic outlook. The employment outlook is ever so slightly more positive, but forecasts for gross domestic product this year were taken down a modest peg.

There is a slight weakening. Other than that, the committee does not appear to be expecting much difference in the economy relative to the outlook in December. Things seem a bit weaker than January, but bad weather obscures the true state.

Yellen argued we should be paying more attention to the FOMC statement than to the charts

"You have to read this statement as risk off," Steven Englander, a strategist at Citigroup, said in a note to clients. "Other than the very short-term bounce from the bad weather of this winter, supply-side projections are weaker, not stronger, but rates projections are higher."

Advertisement
Advertisement