3 Reasons Yellen's FOMC Remains Dovish
Sober Look | Jul 28, 2014 01:47AM ET
What makes Janet Yellen and a number of other FOMC members so dovish with respect to monetary policy and in particular the trajectory of rate normalization? A Credit Suisse report sites 3 key factors, which Yellen calls “unusual headwinds":
1. Tighter fiscal policy.
The combination of lower government spending and tax increases has created a drag on economic growth (see chart ). This drag is now diminishing, but given the tepid recovery Yellen still views it as a headwind.
2. Relatively tight credit in the mortgage market.
see chart ).3. Low household wage growth expectations.
While US wages have been growing at around 2% per year, expectations for growth remain depressed.
Yellen (see House testimony video below): - " ... households have unusually depressed expectations about their own future income gains. And I think weighs on their feelings about their own household finances and is holding back consumer spending."Get The News You Want
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Written By: Sober Look
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