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.
