Monday, March 24, 2014

Janet Yellen first press conference

Janet Yellen braved her first press conference. and had to explain her committee’s decision to continue cutting back the bank’s quantitative easing (QE) programme, and set out its new “forward guidance” about future interest rates.

The economy, Ms Yellen explained, can cope with this. She repeatedly returned to labour-market improvements: falling unemployment rates and other indicators such as the number of “marginally attached” workers, and those that work part-time but would prefer a full-time job.

In mid-2013 government-bond yields rose by over 1 percentage point as the Fed started to moot tapering its QE programme. This fed through to mortgage rates and may have dampened demand for new houses.

It points to another worry. Other important interest rates, including those firms pay in debt markets, are also closely linked to government-bond yields. If those yields rise again America may need a fresh monetary boost. Ms Yellen’s guidance may have to get much stronger.

Janet Yellen rate rise surprise

No one expects the Fed to lift rates in the near term. Still, comments this week from Janet Yellen, who just took over as Fed chair, caught many in the market off guard when she suggested the central bank may be in a position to raise its key interest rate as soon as six months after ending its massive bond-buying stimulus.

That could put the first rate hike on the table by the spring of 2015 compared with previous expectations for no sooner than the second half of the year. Indeed, rate futures markets now assign a 52 percent probability to the Fed's April 2015 meeting for the first rate hike versus just a 33 percent chance a month ago.

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Monday, March 3, 2014

Fed cannot regulate Bitcoins

Bitcoin is a payment innovation that’s taking place outside the banking industry. To the best of my knowledge there’s no intersection at all, in any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and regulate. So the Fed doesn’t have authority to supervise or regulate Bitcoin in anyway.

It’s not so easy to regulate Bitcoin because there’s no central issuer or network operator. This is a decentralized, global [entity].