Janet Yellen just gave a master class in feeding the hopes and dreams of virtually everybody without committing to anything.
The Federal Reserve Chair delivered a speech Friday in Jackson Hole, Wyoming, that had "a little for everyone," as Brean Capital's head of macro strategy, Peter Tchir, wrote in a note. For the interest-rate hawks, Yellen said the case for an increase this year had strengthened because of the health of the U.S. economy. But for the doves, she indicated the Fed had no plans to raise benchmark borrowing costs quickly.
Central bankers have no intention of liquidating their $4.5 trillion balance sheet soon and will continue reinvesting the money they get back from maturing securities. And they're still looking at all the data, lest you were worried they'd just closed their eyes at this point.
Yellen has elevated careful and deliberate into an almost Zen-like state. Her speech provoked a largely anodyne reaction, allowing traders to head off for a late summer weekend in a fog of Fed-induced tranquility.
Stocks gained before reversing slightly.
U.S. government bonds gained.
Traders priced in a slightly higher chance of a rate hike this year, but the shift wasn't so significant as to immediately upend anyone's strategy. Besides, there's a growing sense that a single rate increase will have little effect on the markets.
This muted, benign reaction is impressive considering that Yellen took the podium against a backdrop of deep angst and exhaustion. Expectations were high for her to give some direction to listless markets, but she clearly didn't want to do that. Her job was simple: Throw out enough information not to spook traders while perhaps nudging them a little more toward pricing in a near-term rate hike, but not too quickly lest the Fed chooses to drift some more.
Yellen gets an A+ with her speech. She has perfected the kitchen-sink approach, giving everyone a morsel to believe what they want to believe. Everyone's right, so nobody's wrong.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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