US Federal Reserve chair Janet Yellen will today speak publicly for the first time since the shock election of Donald Trump as President, as investors predict a December interest rate rise.
Investors will be listening closely to her testimony to the Joint Economic Committee (UK 3pm/10am EST) for further clues to a widely expected interest rate rise at the next meeting of the Fed’s Open Markets Committee on 14 December, as well as hints of further cuts at meetings throughout next year.
“The markets may have priced in December but as of yet, only one hike is priced in for next year which strikes me as being too few under the circumstances, even not accounting for Trump’s spending plans,” said Craig Erlam, senior market analyst at Oanda.
The US dollar was trading lower ahead of the meeting, having briefly reached 13-year highs yesterday. It dropped by 0.41 per cent against a basket of major currencies. The euro was also strengthening against the dollar, rising by the same amount since today’s open.
The Dow Jones was set to open 18 points higher at 18,876. It traded at record levels following Trump's victory.
While any explicit confirmation of a rate rise is unlikely at the hearing, investors will scrutinise Yellen’s words to try to ascertain her outlook on the US economy as it enters a new political and fiscal era.
Markets have bet on a de facto fiscal stimulus from Trump, which has sent money rushing from bonds into US equities as investors bet on growth fuelled by government spending.
She is also likely to face questions about her personal role as chair, after her independence was called into question in past months by the President-elect.
During the election campaign Trump was heavily critical of the world’s most powerful central banker, accusing her of political interference to aid President Barack Obama’s Democratic party. He alleged that Yellen had created a “false economy” by keeping interest rates artificially low.