What do Siegfried and Roy have in common with Federal Reserve Chairman Janet Yellen?
Shortly after the Bureau of Labor Statistics released unemployment data last month showing that joblessness had dropped below 6% for the first time since the 2008 crash, the Federal Reserve announced it would stop government bond purchases; Quantitative Easing is history.
The Federal Open Market Committee’s (FOMC) October 29 announcement states:
Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace. Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing. …
The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. … Accordingly, the Committee decided to conclude its asset purchase program this month.
To better understand what all that means in English, we need to back up a bit.
In 2012, Principal Global Investors Economist Robin Anderson noted of Yellen:
Janet Yellen … is the latest in a string of Fed bigwigs to get behind an idea of using explicit inflation and unemployment targets to inform the market about the Fed’s future plans – forward guidance, in Fed-speak. …
Essentially, the idea is to set up explicit thresholds for inflation and unemployment measures (the two mandates for the Fed) to help set expectations about the future of monetary policy if there should be a disconnect between the two.
This post was published at GoldSeek on 11 November 2014.
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