Economist's Insights

Yellen doesn’t Move the Needle on Policy Outlook

Jun 27, 2017

In a speech in London, Fed Chair Yellen spent a measurable amount of her time discussing improvements in the safety and soundness of the U.S. financial system. She noted bank capital positions were much stronger, pointing to evidence in the continued improvement in stress test results. Her confidence was such that she went as far as saying another 2008-esque financial crisis was unlikely “in our lifetime.” On the current outlook, she said there are reasons to believe rates will remain low for a period and noted that markets have listened to the Fed’s call for only gradual rate hikes. Despite recent weakness in the correlation, she said there are still many at the Fed that still believe in the Phillips Curve. She, like other officials, also touched on frothy asset prices but said the Fed doesn’t target asset price level.