① Yellen said that she currently does not agree with traders' current expectations for the Fed to cut interest rates; ② However, the market can sometimes supplement the actions of policymakers; ③ She said that the market's expectations of the Fed's decisions are part of the decision mix.
Financial News Agency, December 7. US Treasury Secretary Janet Yellen (Janet Yellen) said on Wednesday that the bond market's expectations of the Fed's interest rate hike/cut may be a “useful addition” to monetary policy, provided participants are thoughtful in interpreting the upcoming data.
Yellen said that she currently does not agree with traders' expectations for the Fed to cut interest rates.
Judging from market quotes, investors expect the possibility that the Fed will cut interest rates in March next year by more than 50%, and expect that by the end of 2024, the Fed's benchmark interest rate will drop to around 4%. Currently, it is 5.25%-5.5%, which means that interest rates will be cut by more than 100 basis points next year.
Yellen pointed out that the market can sometimes complement the actions of policymakers, and their expectations of the Fed's decisions are part of the decision mix.
She further explained, “The Fed clearly wants to create a financial environment consistent with reducing inflation. The market can predict the Fed's future actions based on the interpretation of subsequent data.”
“This is a healthy response, and if the market reads this data thoughtfully, it may complement monetary policy. The Federal Reserve will take whatever action they see fit, and market conditions will have an impact on this.” she added.
Treasury bond yields fell further on Wednesday as private employment data showed a further cooling of the job market, and US Department of Labor employment data is expected to be released on Friday.
Finally, Yellen reiterated her view that the US economy's “soft landing” — a slowdown in economic growth and lower inflation — is on track.
“Of course, this is risky. I cannot rule out the possibility that the economic slowdown will exceed expectations. But I think I'm very optimistic about the economic outlook.” she added.
In fact, in her previous speech, she said that in the past, the Federal Reserve sometimes had to drastically tighten monetary policy to prevent inflation from becoming entrenched in the economy and leading to a recession.
“We don't need this right now (meaning tightening monetary policy),” Yellen said. “I think the current signs are very good. We will achieve a soft landing, more or less stabilization of unemployment, and a slowdown in economic growth to a sustainable level. I think that's the point of the situation we're in.”