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Let's get more insight on how Wall Street responded to this rather surprising comments
from U.S. Fed Chair Janet Yellen's press conference. We have Angela Moon, senior correspondent
at Thomson Reuters in New York connecting with us live to give us an exclusive look
on how Wall Street took the news. Angela, you must have first hands-on experience,
if you will, on market reaction to the presser from Janet Yellen.
We know the market sold off on this initially but tell us in detail - how the atmosphere
was, how the traders, investors took the news.
Good afternoon there, Connyoung. I have to say today's presser was one of the most unexpected
events from the U.S. Federal Reserve. The statement from the central bank's latest
policy meeting was really in line with market expectations but the real surprise came from
Janet Yellen's presser which was aired about half an hour later after the release of the
statement. Yellen said the central bank could start to
raise interest rates around six months after its current asset purchase program ends.
She said the bond purchases would probably end in the fall which means a rate reduction
six months later would move up the timetable for the Fed's first hike, which many market
participants had been expecting in the second half of 2015.
Angela, that does seem like something that would take the market by a surprise.
What are analysts saying on Wall Street?
Well, several analysts are wondering whether her answer was an unintended slip, given the
deliberately vague language of the Fed's statement. But whether it is or isn't, the reaction in
financial markets was swift and sharp as prices for U.S. stocks and government bonds add ed
to earlier losses triggered by fresh Fed forecasts that showed policymakers are inclined to raise
rates a bit more aggressively than they had been just a few
months ago. Most top Wall Street economists, however,
continued to see the first rate hike in the second half of 2016, according to a Reuters
poll... so it's definitely a mixed, divided picture here.
Going back a step, I realize this was Janet Yellen's first press briefing as the Chair
of the Federal Reserve. How did the investment community evaluate her first presser?
Well, like you mentioned, it marked the first press conference for Janet Yellen, the first
female Chair of the Federal Reserve. The Fed holds these press conferences regularly
to let the public know how the nation's central bank is delivering on its two major tasks
which are lowering the unemployment rate so that nearly all Americans have jobs; and controlling
inflation, to make sure you're not paying too much at
the supermarket. It was historic enough to see a woman deliver
the official diagnosis on the US economy. Yet Yellen's first policy statement was historic
for another major reason which is that she showed that she is running a very different
kind of Federal Reserve than the one Ben Bernanke ran before.
Unlike Bernanke, who often catered to Wall Street's fears, this new Federal Reserve appears
to be reluctant to play the usual game. It was clear that under her rules, the Fed is
stepping away from its reputation as a bunch of economics nerds eager to please the cool
frat boys on the trading
floors, if you will. The best example came when Yellen wiped away
one lazy way of measuring the economy's health. The Fed, under Bernanke, promised that when
the unemployment rate hit 6.5 percent, the central bank would raise interest rates. This
was called quantitative guidance, and it fed Wall Street's
fetish for largely made-up numbers. But Yellen basically shut down argument saying that the
Fed will take into account a wide range of information, including measures of labor market
conditions, indicators of inflation pressures and inflation expectations, and readings on
financial
developments, giving a new definition to what qualifies as quote "quantitative guidance."
Angela Moon, senior Wall Street correspondent at Thomson Reuters New York - Thanks, Angela
for joining us to deliver us the very latest on Wall Street.