Yellen to get quizzed as taper
WASHINGTON (MarketWatch) - It's a pretty good time for Janet Yellen to face some public scrutiny.
The nominee to chair the Federal Reserve will be questioned by the Senate Banking Committee on Thursday at 10 a.m. Eastern, at a time when markets have changed their tune on when the central bank may start reducing its bond purchases.
Yellen has never been in a hurry to taper, but the jobs data released Friday offer some food for thought.
Read: U.S. economy adds 204,000 jobs in October
Over the last year, jobs growth has averaged 194,000 per month - a sign of an economy in which the labor market is making genuine if not rapid progress. To be sure, the 7.3% unemployment rate is still high, but is it high enough to warrant the extra accommodation provided by the central bank's $85 billion-per-month in asset purchases?
That's what the market wants to know from her confirmation hearing.
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'We expect that the committee will approve her nomination, which would allow a full vote to take place in the Senate,' says Paul Dales of Capital Economics. 'But more interesting will be whether Yellen provides any hints of if she wants tapering to take place sooner or later.'
The other question that could come up is the recent hubbub over academic papers by senior Fed economists. The short version of their research is that the Fed would be better off lowering the unemployment rate threshold to 6% for when the central bank would even consider increasing interest rates from their current, near-zero levels.
John Williams, who used to serve as research director for Yellen at the San Francisco Fed and now is president of the regional bank, has poured cold water on that notion. He said he wasn't sure that changing the threshold 'to a lower number would actually tell people on its own anything different than what we're saying now,' but what his former boss thinks remains to be seen.
The data due for release during the week doesn't quite pack the same punch as the gross domestic product and jobs reports released in the previous week.
Yelena Shulyatyeva, an economist at BNP Paribas, says she'll be looking at the National Federation of Independent Business's small-business optimism index, which is due Tuesday morning.
'Political uncertainty affects those surveys to a larger extent than larger companies,' she said.
Other data set for release including weekly jobless claims, the September trade balance, third-quarter productivity and October industrial production.
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