Financial markets appear to like what Federal Reserve Chair Janet Yellen has said so far in her appearance before the congressional Joint Economic Committee up on Capitol Hill.
A short time ago she was asked about this Wall Street Journal op-ed by Fed historian Allan Meltzer How the Fed Fuels the Coming Inflation and, while responding, she objected to the term “goosing” when referring to the effect monetary policy has had on the stock market.
The U.S. Department of Agriculture forecasts that food prices will rise as much as 3.5% this year, the biggest annual increase in three years. Over the past 12 months from March, the consumer-price index increased 1.5% before seasonal adjustment. These are warnings. Never in history has a country that financed big budget deficits with large amounts of central-bank money avoided inflation. Yet the U.S. has been printing money—and in a reckless fashion—for years.
The relationship between Fed money printing and growing inequality in the U.S. was also brought up in this interchange and Ms. Yellen didn’t acquit herself particularly well, offering up the usual “trickle down” theory of boosting the economy without calling it such.
Senator Bernie Sanders (I-VT) just asked her whether we’ve transformed into an oligarchy of some kind with Fed policy only making this situation worse and she similarly didn’t have anything very useful to say. Yellen just admitted that Fed forecasts are just “guesses”, a word she stumbled over twice before finally getting it out, and she clearly seems to be most comfortable talking about such things as the intricacies of the labor force participation rate rather than much weightier questions about the effect of central bank policy.
I haven’t watched one of these in some time (and not one of Yellen’s prior appearances) – it’s all quite fascinating and, for once, lawmakers are asking some interesting questions.
For some reason, Wall Street seems to just love what she’s saying.