By Matthew Kerkhoff
Chair Yellen spoke at the University of Massachusetts-Amherst yesterday and struck a tone of clarity with markets regarding the upcoming rate hike. After muddying the waters last week with comments that infused uncertainty into understanding the central bank’s thought process, the hawkish comments were greeted warmly.
Yellen is ready to raise rates this year. She emphasized the fact that monetary policy affects the economy with a lag, and that it is prudent to begin the tightening process now to avoid having to tighten too quickly down the road. As economic quarterback, she understands the need to throw the ball to where the receiver is heading, not to where he is now.
Even though this implies tighter US economic conditions down the road, investors have come to see it in a positive light, as it implies faith and strength in the underlying economy.
Yellen’s speech was focused on inflation, the one aspect of ... Log in or subscribe to continue reading.