Stock markets flatline, Canadian dollar falls after US Fed speech

“We see no reason why FOMC chairwoman Janet Yellen would firm up her intention to raise the Fed funds rate five weeks ahead of the next FOMC meeting”, he continued.

Everyone has been hanging on the Fed Chair’s words, anticipating the Jackson Hole remarks in the manner of a sensationalized “Yellen Watch”. Yellen did imply that a September rate hike would be “appropriate”, but left enough wiggle room that the Fed can continue to keep rates lower for longer.

Other Fed officials, including several close to Yellen, have favored a more cautious approach. The rally has sputtered in the second half as signs of an improving United States economy rekindled rate concerns, prompting some investors to rein in bullish bets. “Like her colleagues on the Federal Open Market Committee, she’s acknowledging that the economy is doing better after a bit of a stall earlier in the year”.

The Jackson Hole summit actually kicked off on Thursday night, but the big fireworks of the annual two-day meeting were the opening remarks given by Chair Yellen at 10 am EST.

She spent much of her speech on the Fed’s tools that it has used to respond to the Great Recession.

U.S. stocks wavered and closed lower this week, as investors digested a key speech from U.S. Federal Reserve’s Chair Janet Yellen and a batch of newly-released economic reports.

The last Fed rate increase came last December, marking the first in nearly a decade.

Alarm bells would have been ringing for Yellen when The Wall Street Journal last week ran a front-page article, Years of Fed Missteps Fuelled Disillusion with the Economy and Washington, which argued that the Fed’s failure to engineer a robust recovery in the wake of the financial crisis had fostered the rise of populist politicians, such as Donald Trump and Bernie Sanders.

At the time, the Fed foresaw four additional rate increases in 2016. The three are viewed as the core of the US central bank, and the most influential in setting policy.

“Investors are not pricing in a Fed tightening”, said Swonk, who expects the Fed to take no action until January.

The theme of this year’s conference is “Designing Resilient Monetary Policy Frameworks for the Future”, a nod to the tough environment the Fed faces.

“Helicopters, negative rates or a higher inflation target remain confined to other central banks or academic circles”, Commerzbank economist Bernd Weidensteiner wrote after Yellen’s speech.

In advance of Yellen’s speech Friday, several Fed officials met Thursday with about 120 activists from the Campaign for Popular Democracy’s Fed Up coalition.

The decision will likely be made after a Labor Department report, expected September 2, which could show steady improvements in hiring and lead to a rate increase, the Wall Street Journal said Friday. “It was a substantive conversation, and they said they would consider our proposals”.

Talking about the Fed’s ability to help promote and support a strong and resilient financial system, Yellen also highlighted that current monetary policy tool kit may be expanded, giving a nod to further, and perhaps different, asset purchases.