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What's going on?
Fridays weak jobs figures didnt give the US Federal Reserve (the Fed) the green light it was looking for to raise interest rates soon. Thats why everyone was very keen to hear chairwoman Yellens big speech on Monday…
What does this mean?
Overall, Yellen appeared relatively optimistic about the current economy. She did say that Fridays jobs report was disappointing but highlighted that the employment environment had improved markedly in recent years. Along the same lines, she cautioned that it was just one months data and that its importance should not be overstated. Nevertheless, she acknowledged the jobs data was disappointing and said further employment data should be watched closely in the coming months.
Why should I care?
For markets: A summer interest rate rise now looks a lot less likely. Fridays poor employment report reduced the likelihood of an interest rate rise this summer dramatically. In her speech, Yellen didnt say that a rate hike could be warranted in the coming months – a phrase she had used only a few weeks ago. Instead, while she maintained that the trajectory of interest rates was likely upward, she dropped any reference to a timeline which is a suggestion that an increase in June is off the table and one in July is a lot less likely than it was prior to the jobs report.
The bigger picture: Global headwinds are fading. Earlier in the year, weakness in China (in particular) likely contributed to a slowdown in the US (and places like Europe). Yellen said she was cautiously optimistic that international pressure on the US economy had eased considerably. Which, if true, would be good for pretty much everyone.
Originally posted as part of the Finimize daily email.
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