Monday, March 31, 2014

Clarity from Chairman Yellen


“This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy makers,” Yellen said at a community development conference in Chicago. “The scars from the Great Recession remain, and reaching our goals will take time.”

So now the Fed chairman is a dove. Earlier in the month she was a hawk. The word of choice is now to say the economy is filled with "slack". Is this the forward guidance the market needs? These types of comments just creates uncertainty and will increase the risk  premia in both stock and bond markets. The central bank cannot solve the employments problems of the individual. It should solve the problem of risk and uncertainty through having a well-articulated clear policy. By solving the group problem, the individual will be helped. 



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