Live Blogging Janet Yellen

I am absolutely thrilled to be preparing to bring my live blog of former FRB SF President Jane Yellen who is one of the most significant women leaders in economics and finance of our time.  Dr. Yellen was the Chair of the White House Council of Economic Advisors under President Bill Clinton. She is currently the Vice Chairman of the Fed system.
She’s speaking at the Financial Management Association conference today in Denver.  She is receiving the outstanding Financial Executive Award.

She notes that the recovery is disappointing.  She plans to discuss monetary and fiscal policies that can help the US economy.  She is mentioning that the recovery has improved things since the worst of the recession. But, she still says the economy is less vigorous than desirable.  Recent data says the recession was deeper than thought.

She believes that the temporary factors from the Japanese tsunami that disrupted the auto industry and high gas prices have moderated.  She believes that the restricted access to credit, consumer sentiment, and weak consumer spending is creating  concern among business people.  This has made businesses reluctant to expand their operations.  The housing sector continues to depress the economy.  The housing sector has historically played an important role in improving economic conditions.  This is not happening this time.  There are a lot of factors causing this.

Yellen believes that states are also playing a role in restraining the pace of recovery.  She’s believes that the path of fiscal policy is weighing on both household and business confidence.  The one bright sector in the US economy has been exports but this is not going to continue.  She believes this is due to both the EU situation and the slow down in developing nations’ economies.

She says that financial markets are experiencing unusual volatility which is putting pressure on financial institutions and investors.  The US economy as well as slow growth abroad is part of this.  Also, the EU situation is troubling markets.  She believes that the political considerations in trying to develop and implement solutions to the EU problem is creating stress.  She thinks this could cause a retightening of credit conditions and could impact US financial institutions.  She believes that also the deterioration of the US economic outlook could put stress on banks too.

Yellen is now talking about the outlook for inflation.  She believes that any recent inflation was due to oil and other commodity prices being volatile, and also due to the Japanese earthquake and that inflation will moderate.  She believes that the target inflation rate will be attained.  She believes also that long term inflation expectations remain stable and is more concerned with disinflation or deflation.  She thinks that the risk of that is much higher.

Yellen is speaking now to the dual mandate of the Fed and monetary policy.  She is giving some background on the zero bound policy.  (She’s on the FOMC, btw.)  She’s also speaking to the importance of fomc clarification on monetary policy and the role they have reassuring the market they will keep interest rates low given the current conditions of subdued output.  She is also talking about how a communicated target rate based on employment or inflation might give the market more confidence on the stability of the low targeted fed funds rate.

She expects that unemployment and the economy will improve even though there are significant downside risks.  She says the FOMC is watching things carefully and will use tools as appropriate.

She is now taking questions from the floor.  The first one is basically about the give and take between signals to and from the market and the FOMC on setting market expectations for inflation.

Okay, I need to go prepare to present something so I’m leaving you with this now. Hopefully, this will give you some insight into the FOMC.

Take care