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Yellen explains it is not a change in  policy and sounds relatively bullish, even though  the decision is data dependent. This is happening after the Fed released a balanced statement that eventually hurt the dollar.

We are seeing the dollar rebound very nicely  during the press conference as Yellen sounds bullish about the economy and says rates are set to rise in 2015.

Here is a live blog:

Highlights

  • Oil price impact is transitory
  • The fall in oil prices is net positive. Like a tax cut
  • Conditions are improving
  • Everything is data dependent.
  • No rate hike in next two meetings
  • Rates will rise in 2015
  • “Normal” rates  are 3.75%
  • Dollar  strengthens after the statement.

Live blog:

  • The economy continues improving
  • New language is consistent with prior language.
  • The pace of jobs growth has been strong: around 230K jobs per month in the last 12 months.
  • Broader measures have shown similar improvement.
  • There is room for further  improvement – too much underemployment
  • Real GDP looks to have increased robustly in Q3, lots of investment.
  • Around 2.5% growth in 2014
  • Moderate growth going forward
  • Recent declines in oil prices will hold down inflation in the short term
  • As oil price impact moves away, inflation is expected to move back to its objective
  • The Fed is aware of inflation expectations but sees them as  transitory but require close watching.
  • The dollar is slightly strong as Yellen talks
  • The central tendency is 2.3 – 2.4% for 2014, up from September.
  • Inflation set to reach 2% in 2017
  • Committee reaffirms its view that the interest rate remains appropriate.
  • Core PCE remains well balanced.
  • The committee is not signalling a change in policy.
  • Fed doesn’t believe it will begin the normalization process [hike rates]for ‘at least the next couple of meetings
  • However, with the end of QE in October, it seemed less useful to refer to the rate rise to an event that happened in the past.
  • Employment is rising at a healthy rate.
  • The US economy is strengthening.  
  • Inflation is running below 2% but we project it to reach the goal.
  • At some point it becomes appropriate to adjust policy.
  • Even if the economy improves, we could still leave interest rates lower for longer.
  • Rates will rise in 2015
  • Guidance is consistent with FOMC participants.
  • EUR/USD is below 1.24 once again.
  • Core inflation expected to be running near current levels.
  • Even if the central tendency is low, we could still wait.
  • Interest rates will reach normal levels by 2017.
  • Reinvestment of QE is set to continue to support stimulus.
  • 2015 FOMC meetings: Jan 28 Mar 18 Apr29 Jun 17 Jul 29 Sep 17 Oct 28 Dec16. Fisher kocherlakota plosser dissenters today, off board next year
  • We have no preset or pre-determined time.
  • There is a range of views on the committee.
  • We could raise rates without a press conference.
  • Everything is data dependent.
  • Conditions will be appropriate during 2015 according to participants.
  • Core  inflation will likely run close to its current level.
  • We are looking for a sense of reasonable confidence.
  • As labor market conditions continue improving,  inflation is also set to rise.
  • Every meeting is a live meeting.
  • The dollar remains  above the pre-conference levels and above the pre-statement levels.
  • The fall in oil prices is net positive. Like a tax cut.
  • We see downward pressure on headline inflation and is set to continue to push it down, perhaps spilling into core inflation.
  • We see these developments as transitory.
  • Yellen unexcited about falling oil: contrary to Draghi: It’s not the different mandate but the economy: EZ unemployment: 11.5%, US: 5.8%
  • Yellen does not want to analyze markets, but does  mention safe haven flows.
  • Many questions about oil.
  • EUR/USD already below 1.2320.
  • Yellen says “couple” means two meetings. This is the dictionary  definition, even though “couple” often means “a few”.
  • She refuses to provide an exact timing, and that’s not new.
  • Interest rates are low for some 6 years…
  • Monetary policy to stay accomodative  for a long time.
  • “The committee is not considering an overshoot of its 2% inflation objective.”
  • EUR/USD bouncing from the lows. The markets are set to digest these events for long hours.
  • Yellen  goes a long way to explains market movements, basically saying “the jury is out” about inflation compensation numbers.
  • Regarding  dissents, it’s a good thing. Very good to see divergence.
  • Regarding the pace, we would probably not like to repeat of gradual moves.
  • Many participants said that policy should move according to the data.
  • Data dependent is the key phrase.
  • The committee believes that the economic conditions that have made the recovery difficult are moving away.
  • “Normal interest rate” is 3.75%.
  • No secular stagnation.
  • Monetary policy will have to stay accommodative.
  • Path of rates depends on economic conditions/
  • We are monitoring Russia. The ruble has depreciated.
  • This is bad for the Russian economy. We discussed spillovers to the United States. These linkages are relatively small.
  • Russia  counts for around 1% of US trade.
  • Press conference ends
  • EUR/USD loses a couple of support lines on Yellen’s couple comment
  • USD/CAD forms double top amid bullish Yellen, bullish oil
  • AUD/USD setting new 4 year lows on Yellen hawkishness  

More:  USD Bull Cycle – How much further can it run? – Credit Suisse