Will There Be New Guidance on Forward Guidance?

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Feb. 10 (Bloomberg) –- Keefe, Bruyette & Woods Senior Vice President of Washington Research Brian Gardner and Bloomberg’s Mike McKee discuss Fed Chairman Janet Yellen testifying before Congress for the first time since becoming Fed Chairman. They speak to Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

Fairly polite.

It is her first hearing after all, as the new fed chair will stop there -- the new fed chair.

There may be questions about the direction of the economy.

We were supposed to have a better 2014 than we have been having.

Job growth has been disappointing and people want to know why that is and we have seen housing fallback.

And manufacturing numbers have coming a bit weaker.

The fed offered its forecast in december and was saying a three percent growth rate this year.

Capitol hill will be asking if we will be able to get there.

And she is expected to say that policymakers will continue with the tapered?

Yes, it is on track at this point because when they said they were going to taper, the numbers from then until now have gotten better in terms of hiring and participation rates.

They are a little bit better than they were, so the fed can keep going with that, because they want to get out of this business.

The balance sheet is over four dollars trillion and they are being criticized by emerging markets.

-- is over $4 trillion and they are being criticized by emerging markets.

One question they may be asked is how bad the numbers need to be with jobs before you cut back on the $10 million a month.

Any chance we will get a straightforward answer?

This is where we will see her fed chair training that she learned, the speaking without saying very much.

They may have to change their forward guidance, the idea of the 6.5% unemployment threshold.

This is what they said in the last statement.

This lengthy explanation of why they are not paying any attention to the six point five percent.

All these words basically come down to, "nevermind or cap." people will be interested to see if she changes that hadn't going forward.

Let's go back to brian gardner, the senior vice president of washington research at his firm.

He is still an rdc bureau.


gardner, ms.

Yellen's first-order business, is it to explain fed policy as she sees a gap of i think it will be to explain why the fed targets are on target.

In the past, i think they have been overly optimistic in the forecast.

She will have to explain that.

And also on the targeting, what does it matter?

She has been one of the more staunch opponents of forward guidance.

What does the guidance matter if you get to these targets, as ben bernanke has explained, they are not triggers, but targets.

What is the role of forward guidance?

It will be a tough one to its plane, but she does need to explain it to the markets.

And she will be putting the fed's views into her own context , but it is supposed to be a testimony about what the whole fomc thinks, not what janet yellen thinks.

Not to mention, she has been on the job for 10 days when she testifies.

The fomc will not be meeting for another month.

I think she will be very cautious.

She really does not have the authority to speak beyond what the fomc has done to date.

She has not been running the fomc.

I think only get to march, we will get a little bit more out of her in subsequent hearings.

But tomorrow, i think she needs to be rather cautious.

The feds economic forecast them a if it is off, will she be able to him and congress that they will pivot if conditions warrant it?

I think she needs to convince the markets and investors more than congress.

She has to be deferential to congress, but i don't think they are her target audience.

This is where she needs to walk a tightrope explaining why the fed's forecasts are credible, and at the same time saying that they will use other tools if necessary and doing that without spooking the markets at the same time.

That is a rather delicate balance.

But i think she's up to the task.

Employment is close to that six point five percent threshold that the fed said under ben bernanke.

Michael just alluded to that.

But the central bank is still easing its policy and buying bonds at a reduced rate.

What might that forward guidance under janet yellen look like?

That is a great question, and i hope one of the senators brings it up tomorrow and on thursday.

I think we are going to get yellen speak.

I don't think we are going to get a clear answer, for the reasons i alluded to in my previous answer.

I think she will want to wait until march to work with her colleagues and get closer.

I don't think we will get a clear answer on that particular question tomorrow.

Brian gardner, senior vice president in rdc bureau.

This text has been automatically generated. It may not be 100% accurate.


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