The full-text of Yellen’s opening statement is up on the Fed’s website.
Here are some highlights:
“In sum, since the February Monetary Policy Report, further important progress has been made in restoring the economy to health and in strengthening the financial system. Yet too many Americans remain unemployed, inflation remains below our longer-run objective, and not all of the necessary financial reform initiatives have been completed.”
Translation: We’re not worried about inflation and in no rush to hike.
“Labor force participation appears weaker than one would expect based on the aging of the population and the level of unemployment. These and other indications that significant slack remains in labor markets are corroborated by the continued slow pace of growth in most measures of hourly compensation”
Translation: All the jobs are part-time McJobs, no one ever gets a raise and Bernanke was wrong in saying the fall in labor force participation was wrong.
“Considerable uncertainty surrounds our projections for economic growth, unemployment, and inflation. FOMC participants currently judge these risks to be nearly balanced but to warrant monitoring in the months ahead.”
Translation: We’ve been wrong so many times before that we’re not going to do anything until we’re sure the economy is accelerating.
If the labor market continues to improve more quickly than anticipated by the Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned. Conversely, if economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated.
Translation: I’m throwing a bone to the hawks but I still want the economy to prove itself over time before hiking rates.
The final part that’s getting attention, especially in the Nasdaq is a separate filing where Yellen talks about stocks. She says that small cap, biotech and social media forward PE ratios are “high relative to historical norms”.
