However, concerns over the legitimacy of the unemployment rate as an economic gauge have inclined Yellen’s committee to consider a wider range of economic indicators in deciphering rates. Thus, the timeline for climbing interest rates has been shrouded in doubt. Yellen went on to explain that she envisages a “considerable time” between the cessation of quantitative easing and the first rate hike. In questioning following the conference, the new Fed chair controversially indicated that “considerable time” could refer to a time span as short as “six months or that type of thing”. This suggests that interest rates could be on the rise as early as the coming fall. Investors reacted swiftly to Yellen’s comments in afternoon trading as the major US benchmark indices all lost ground. The Dow Jones industrial average fell 114.02 points or 0.70%, to finish at $16,222.17, while the S&P 500 slipped 0.61%, closing at $1,860.77. The NASDAQ also shed 0.59% for the day. The declining indices are largely attributable to investor fears that the timeline for increased costs of borrowing has shortened. Individually Walt Disney Co., General Electric Co. and Boeing Co. were the biggest losers giving up almost 1.5% each. Investors may continue to offload US stock in early morning trading in response to the developments. Visit Spreadex to set up your online spread betting account today.
Joe Expert
Fed policy under Yellen to be largely as expected
The US Federal Reserve’s first meeting under the leadership of Janet Yellen has proceeded predominantly as expected. Yellen confirmed that the Fed intends to continue the process of ‘tapering’ its bond buying initiative. A further $10 billion will be shaved off monthly Fed bond purchases as forecast on this page (Wall Street simmers..) yesterday evening. This represents the third consecutive tightening of Fed stimulus efforts. Yellen also revealed a Fed decision to discard its original plan to use the unemployment rate as a benchmark for bumping interest rates. Outgoing Fed chair Ben Bernanke had previously stated that overnight borrowing costs would be increased once a 6.5% unemployment rate had been reached.
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