Federal Reserve Chairwoman Janet Yellen delivered a highly-anticipated speech at an annual economics conference in Jackson Hole, Wyoming this morning.
Friday, August 22, 2014
Yellen said that “the economy has made considerable progress in recovering from the largest and most sustained loss of employment” since the Great Depression, but maintained that “underutilization of labor resources still remains significant,” Bloomberg reported.
Despite the importance placed on the speech, US markets have remained largely unchanged and continue their path toward a weekly advance. The S&P 500 is up 1.9% on the week, the Dow has risen 2.4% and the Nasdaq is up 1.6%.
No indication of rate hike timing
Many analysts have focused on Yellen’s plan for when to hike interest rates. The chairwoman has not given an explicit indication of that. David Spika, The Westwood Funds senior vice president, told CNBC that it is not the timing of the rise, but the speed. He pointed out that economists know the rate will eventually rise, and it will probably be sometime in the middle of next year.
Instead, Yellen allowed that interest rates hinge upon employment data. If the labor market picks up, the hike could come sooner than expected. But if employment rates stagnate, extended dovishness may prevail.
Market flat at open on Ukraine news
US markets indicated no major gains or losses at the open this morning. The Dow dropped 0.04%, the S&P 500 fell 0.04% and the Nasdaq gained 0.05%. Investors had been hesitant initially, anticipating Yellen’s address, but also considering a recent flurry of activity on the Ukrainian front.
What Russia is calling a foreign aid convoy finally crossed the border into Ukraine without permission, the New York Times reported. The US and European allies have established that any such crossing by any Russian military vehicles, even with the intention of providing aid, will constitute an invasion.
The Ukrainian Foreign Ministry condemned the act, saying they “consider this act another flagrant violation by the Russian Federation of the key principles of international law, including inviolability of borders, noninterference in the internal affairs of another state and conscientious fulfillment of international obligations.”
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