Whether or not you believe Janet Yellen is going to say one thing and do another, we expect few surprises in today’s Federal Reserve testimony at 10am today.
After gazing deeply into our crystal ball, here are our best insights. (We’ll score ourselves later today, after she finishes speaking).
Despite unemployment numbers (supposedly) dropping to their lowest point in six years, Yellen will come up with some reason to keep rates at almost zero. (She’ll probably mention part-time workers… as if low-rates will somehow undo the part-timing effects of ObamaCare).
Yellen will claim that inflation is still non-existent despite everyone in the room being keenly aware of it. Yellen will once again reiterate that price-inflation cannot occur if wages are not rising. Ergo, prices can’t be rising. You must be imagining things.
Yellen will reiterate that it is not her job to pop bubbles… not that she is actually aware of any bubbles anywhere, of course. Her explanations for lofty-equity markets will be silly. We expect her to continue to counter the BIS’ advice to “bring forward the next leg of the cycle“.
On Opacity and Forward Guidance:
Yellen will maintain her position on opacity, claiming that the economy is “complex” right now. Opaque forward guidance will give her carte blanche to do as she pleases at the time of her choosing. Opacity will also prevent her from having to actually have a policy at all.
On Too Big to Fail:
If Elizabeth Warren asks about “too big to fail” (We expect her to), Yellen will put on her sympathetic-face and mirror Warren’s concerns as if the problem of “too big to fail” is beyond her purview. She’ll assure Warren that they’re “looking into it”.
On the “Recovery”
Yellen will be “upbeat” about the recovery but cite potential global headwinds.
On the US Dollar
“A strong dollar is in the best interests of the United States.” But you knew that. Additionally, we would love to hear someone (anyone) ask about BRIC threats to dollar hegemony, but we’re pretty sure no one’s up to the question. We hope to be surprised.
On the Mythical Exit Plan:
When asked about the Fed’s supposed “exit plan”, she will get hand-wavy and prove once again that there simply is no credible exit plan.
On Sentence Structure:
Yellen will begin every single one of her prepared answers with the word “So…”, making herself sound like a mental lightweight. We propose simply using the word “Duh…” in future testimonies.