OK...the Fed chair said December was "Live". What's so new about that?
"We expect", "If the data...", "But importantly, we've made no decision about it"
The Fed chair visited the House Financial Services Committee and talked about banking supervision and regulation. She also was able to get some comments in about monetary policy and the economy.
While Ms Yellen did say:
The Fed expects "the economy will continue to grow at a pace that's sufficient to generate further improvements in the labor market and to return inflation to our 2% target over the medium term, and if the incoming information supports that expectation, then our statement indicates that December would be a live possibility,"
But she also said that "we've made no decision about it". She further hedged the decision by saying "if the data and outlook justify such a move".
ON inflation she said, "if we were to move, say in December, it would be based on an expectation - which I believe is justified - that with an improving labor market and transitory factors fading, that inflation will move up 2%."
As Mike would say... stick a wet finger in the air and think you feel some winds of change.....
On the global impact, Yellen said that "We take global performance into account and at the moment, what we see is a domestic economy that is pretty strong and growing at a solid pace, offset by some weakening spilling over to us from the global economy", She added, "On balance… we still see the risks to economic growth and the labor market as balanced. But the global economy's been a drag"
Is December "live"...Yes and at least the market is greater than 50% of a rate hike in December (it got up to 58% I think). This is much higher than what was expected in October (which was close to 0%). I think that has been objective #1...Get the market to believe a hike can occur.
Does it mean the Fed will tighten? I personally heard the hedging Fed-speak from the chairwoman. That "Yes.. But" or "Yes...IF" language has been present for some time now. So that means to me, that Friday's employment report is still key. Then we will hope December is good too, that holiday shopping is good and that the apple cart (i.e. stocks) stay steady.