Speeches and Testimonies by the FED Chairperson – Dr. Janet Yellen
Eric Furstenberg • 3 min read
Dr. Janet Louise Yellen is currently the Chairperson of the Board of Governors of the Federal Reserve System. On 1 February 2014, she replaced Ben Bernanke and her 4-year term will end in 2018. Of course, she could serve for another term if her reappointment were to be approved by the President and Congress.
Although not all of Dr. Yellen’s speeches and testimonies impact the markets in a meaningful way, many of these speeches have led to substantial volatility.
Is Dr. Yellen the Most Powerful Person in the U.S.?
Some reckon she is, however, I don’t think she’s more powerful than President Donald Trump. Nevertheless, this lady is really influential and when she speaks, the financial world listens.
After all, she is the FED’s most important spokesperson and leads both it and the FOMC committee which sets the United States’ monetary policy in place and executes it.
Speeches and Testimonies of Varying Importance.
Dr. Yellen delivers many different types of speeches which vary between low-importance and high-importance (in terms of its potential to cause market volatility).
To try and filter out all of these speeches to isolate the important ones, would be much less productive than to rather identify the common denominating elements of her speeches which have the potential to cause substantial market volatility.
Speeches and testimonies by Dr. Yellen in which she discusses the United States’ current economic conditions, economic outlook, and monetary policy are generally the most important.
You see, when this authoritative lady comments about interest rates, inflation, the labor market, unemployment, production, and other important economic factors; economists, investors, and other market participants are paying close attention and putting the puzzles together of where the United States’ economy is heading.
An old factory in North Carolina
What also matters much, is how Dr. Yellen and the other FOMC members plan on handling the different economic conditions in which the United States may find itself. And let us not forget about how important the FOMC’s economic projections and interest rate projections are.
Examples of Important Information Conveyed in Speeches by Dr. Yellen
In this speech, we find the following information in the 5th paragraph:
“In the coming months, I expect some further strengthening in labor market conditions as the economy continues to expand at a moderate pace – a view that is shared by most of my colleagues on the Federal Open Market Committee”. Source: www.federalreserve.gov
This is an example of important information which could have an impact on the financial markets, depending on its timing and whether it surprises the markets or not.
Even though a statement like this may perhaps not be a surprise to the different market players, it could be an important confirmation to many traders, investors, and institutions, that the economy is indeed picking up like they might have been suspecting.
The FOMC press conference which accompanies the FOMC interest rate decision is usually hosted by the FOMC chairperson. The ‘opening speech’ by the chairperson is really important and can cause substantial market volatility. Likewise, the questions and answers session of the press conference is also really important.
Here is an example of important information conveyed by Dr. Yellen in the most recent FOMC press conference of which she was the host:
“Today, the Federal Open Market Committee decided to raise the target range for the federal funds rate by 1/4 percentage point, bringing it from 1 to 1-1/4 percent. Our decision to make another gradual reduction in the amount of policy accommodation reflects the progress the economy has made, and is expected to make, toward maximum employment and price stability objectives assigned to us by law.” (Second paragraph)
“However, with employment near its maximum sustainable level and the labor market continuing to strengthen, the Committee still expects inflation to move up and stabilize around 2 percent over the next couple of years, in line with our longer-run objective.” (Sixth paragraph)
These comments, for example, are hawkish and produced U.S. dollar strength. You will notice this if you look at the 5-minute charts of some major currency pairs. In the first 5 minutes of Dr. Yellen’s speech, the dollar rose quite aggressively.
A professional trader’s most important objective is always proper risk management.
As you have just read, certain speeches by Dr. Yellen has the potential to unleash tremendous market volatility. You should, therefore, be careful during these events and seek ways to mitigate your risk.
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