US: Fed Chair Press Conference

Wed Mar 18 13:30:00 CDT 2015

Today, Fed Chair Janet Yellen explained today's FOMC statement. Comments clearly are dovish even though the word "patient" was removed from guidance.

She restated that rate increases are data dependent. She noted a downward revision to GDP growth forecasts and that policy rate forecasts have been nudged further out.

Yellen specifically noted that the removal of "patient" does not mean the FOMC will be impatient. According to the Fed chair, there has been no decision on the timing of a first rate hike.

Despite the lower GDP forecasts, Yellen still sees the U.S. economy as growing moderately healthy. She sees inflation slowly moving up to target as energy has been weak. Wage inflation is a key issue and wage growth has been soft. Yellen says that there is "no simple answer" on upcoming policy decisions. She specifically stated that the Fed should be neither premature in raising rates or being behind the curve in raising rates.

Labor productivity was an unexpected issue during Q&A. On questioning, Yellen stated that low productivity may be behind low wage growth.

Chair Yellen defended Fed independence, stating the importance of Fed FOMC deliberations.

She did not comment on an FOMC leak, indicating that an investigation continues.

Overall, Chair Yellen clearly is in the dove camp along with most of FOMC participants. Markets reacted favorably to both the FOMC statement and the press conference with loose monetary policy continuing. The combination of being predictable on "patient" and generally dovish comments lifted equities and bond prices.

Yellen likely will stick with data dependence but for now the data suggest a delayed rate hike. Stay tuned for FOMC minutes in 3 weeks for more detail.

The Fed announced on March 24, 2011 that then Fed Chair Ben Bernanke would hold press briefings four times a year to explain the FOMC's latest quarterly economic projections. Additionally, the purpose of the briefings is to provide additional context for the FOMC's policy decisions and to allow for Q&A with the press. According to the Fed, the "introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication." As of March 20, 2013, the press briefing is held at 2:30 p.m. ET on the days of FOMC statements in which quarterly projections are released. These FOMC statement dates are designated as the ones released in the final month of each quarterMarch, June, September, and December. The policy statement is released at 2:00 p.m. ET after the conclusion of every FOMC meeting regardless of whether there are forecasts or not. This schedule started March 20, 2013. Fed Chair Janet Yellen continues this practice of holding the quarterly chair press conference.

The Fed's meeting statement and economic projections can move financial markets. However, the Fed's meeting statementwhich indicates any changes in monetary policytypically is very concise and lacking in detail. However, the Fed now releases its economic forecasts four times a year. As of March 20, 2013, the forecasts are released at the same time as the FOMC statement during the months of March, June, September, and December. These are the months that the chair holds a press conference to explain the forecasts and other policy issues. The chair's press conference allows for the financial markets and public in general to learn more about why and how the monetary policy decision was made and to learn more about FOMC views on the direction of the economyincluding real growth, inflation, unemployment, expected timing of changes in the fed funds rate, and expected levels of the fed funds rate in the near term.