Connect with us

Yellen Staying the Course, Institutional Investors Cheer

Published

on

Credit: Library of Congress

Credit: Library of Congress

Janet Yellen, the newly inaugurated chair of the Federal Reserve, gave her first testimony before Congress, delivering the Fed’s semiannual Monetary Policy Report to Congress, also known as the Humphrey Hawkins testimony. Yellen, who became chairman earlier this month, largely echoed the sentiment of her predecessor, Ben Bernanke, defending the use of unconventional policy tools, such as forward guidance, and planning to maintain very low interest rates. Institutional investors around the globe, including sovereign wealth funds and pension CIOs listened intently on her words.

“I expect a great deal of continuity in the FOMC’s approach to monetary policy,” Yellen said in her prepared remarks. “I served on the Federal Open Market Committee as we formulated our current policy strategy and I strongly support that strategy.”

Barring a “notable change” in economic data, Yellen said the Fed will continue tapering its monthly purchase of Treasuries and mortgage-backed securities. The process, known as quantitative easing (QE) implemented by the FOMC, was intended to lower long-term interest rates to stimulate spending in the domestic economy. Under Chairman Bernanke, the Fed scaled back monthly asset purchases to US$ 65 billion.

Although signs of slow job growth will not shake the Fed’s resolve to taper asset purchases, Yellen said the Fed will keep short-term interests rates at zero “well past” the time unemployment reaches 6.5%, which was the benchmark the Fed set for raising rates in 2012, when unemployment was at 8.1%, during its last round of stimulus.

This is approximately a 133% increase in the debt limit from May 2003.

Staying the Course

Yellen said she strongly supports the Fed’s dual mandate to promote employment and control inflation. Unemployment has dropped to 6.6%, but Yellen told the U.S. House of Representatives’ Financial Services Committee that the labor market recovery was “far from complete.” The Bureau of Labor Statistics reported only 113,000 new nonfarm positions added in January and 75,000 in December. In addition, the labor force participation rate plunged over the years – testing late 1970s levels.

Doing the Popular Thing

As many of her predecessors at the Fed have done, Yellen warned that the United States is on an unsustainable fiscal budget path. Rising deficits will crowd out private investment leading to higher interest rates and slower growth, she said. This is on the backstop of Congress agreeing to approve the U.S. debt limit through March 2015. The new U.S. debt ceiling is US$ 17.2 trillion which served as blow to pro-austerity politicians. Near the end of May 2003, Congress approved at debt limit of US$ 7.384 trillion. This is approximately a 133% increase in the debt limit from May 2003.

When pressed by Rep. Michele Bachmann (R-Minn.) to respond to former Congressman Ron Paul’s “Audit the Fed” proposal, Yellen said she strongly objected to “interfering with the independence of monetary policy, by bringing political pressures to bear on the committee’s judgment.” She noted that the Fed is already audited extensively and said she opposed the idea of Washington second guessing central bank decisions.

Grant & Eisenhofer Reveals Fortis Investors to Receive $1.5 Billion in Mega Settlement

Published

on

Law firm Grant & Eisenhofer won a landmark case for its clients after a seven-year legal duel in Dutch courts. On July 13, 2018, the Amsterdam Court of Appeals officially approved the largest securities settlement ever reached in Europe, paving a path for international insurance company Ageas N.V./S.A. to begin payment of US$ 1.5 billion (€1.3 billion) to multiple groups of institutional and individual investors from Europe and the United States. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

State Street to Buy Charles River Systems

Published

on

State Street Corporation inked a deal to acquire Charles River Systems, Inc. (Charles River Development), a provider of investment management front office tools and solutions. Under the terms of the agreement, State Street will purchase Burlington, Massachusetts-based Charles River Development in an all-cash transaction for US$ 2.6 billion. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

FINMA Announces Rothschild Bank Broke Anti-Money Laundering Rules over 1MDB Fiasco

Published

on

The Rothschild Bank AG and one of its units called Rothschild Trust (Schweiz) AG got slapped with serious violations of anti-money laundering in regard to the 1MDB scandal. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.