Economy

Janet Yellen's Jackson Hole Speech Let Us Down - Here's Why

Janet Yellen's Jackson Hole Speech Let Us Down - Here's Why

Carefully scripted remarks by the world's leading central bankers on Friday left the dollar lower but had a muted effect on global stocks, while crude prices rose as monster Hurricane Harvey approached the US Gulf Coast oil hubs.

US shares rose slightly on Friday, boosted by high-dividend-paying stocks, after US Federal Reserve Chair Janet Yellen stayed silent on monetary policy.

"She is sort of putting a stake in the ground here in terms of this regulation issue, which is the one sort of sticking point between her and Trump right now", said Phil Orlando, chief equity market strategist at Federated Investors in NY.

The dollar rose as investors turned their attention to the Jackson Hole central bankers' meeting at which Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi are due to speak on Friday, although no new policy messages are expected from either.

Meanwhile, investors will be looking for Yellen to shed light on the Fed's balance sheet normalization and the pace of future United States rate hikes. The president wants to unwind the reforms, which could be a factor as he considers who should next lead the central bank. The Fed chair has given the president plenty to think about. Investors had been awaiting her speech for any signals about what the Fed might do when it meets next month. Yellen has not given any indication if she would accept, but Trump has criticized her and the Fed, saying during the campaign she should be "ashamed" of herself.

Instead, the speech centered on financial regulation since the 2008 financial crisis. Cohn said he ultimately chose not to leave because of the duty he feels to his job.

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"There are two stories that play out in Washington these days and to a degree it does impact the market - can the President have any success with the overall Washington agenda, whether it is the debt ceiling or tax reform - so far it seems like that is not going to be simple", said Phil Blancato, CEO of Ladenberg Thalmann Asset Management in NY.

Some traders had thought she might address asset prices as a justification for tightening monetary policy further this year.

President Donald Trump picked a new fight on Thursday with his fellow Republicans, saying congressional leaders could have avoided a "mess" over raising the USA debt ceiling if they had taken his advice. She warned that future crises are inevitable but said the housing meltdown taught valuable lessons.

Indeed, while German's unemployment rate is now under 4 per cent, the jobless rate in Spain is still over 17 per cent, more than twice the level before the 2007-2009 global financial crisis.

"The steps to improve the capital positions of banks promptly and significantly following the crisis, beginning with the 2009 Supervisory Capital Assessment Program, have resulted in a return of lending growth and profitability among USA banks more quickly than among their global peers", she said. She also suggested that the so-called Volcker Rule, which limits the ability of banks to trade their own investments, might need to be modified.


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