One can almost imagine Fed Chair Yellen exclaiming "Not so fast, Donald," under her breath, as she answered questions in the post-meeting press conference yesterday. In an abrupt about-face, Janet Yellen claimed that she never suggested the Fed would allow the US economy to "run hot," as she most certainly did during a speech in mid-October, prior to the presidential election. Not only that, but the Fed is now expecting three additional interest-rate increases next year rather than two.
Why the flip-flop from two months ago? The only significant, and clearly unexpected, change that I saw occurring between mid-October and today is that Donald Trump is the President-elect rather than Hillary Clinton. Is it possible that Yellen might have been more accommodative with Fed policy had Clinton won the election, as was expected by the consensus in mid-October? I suspect so.
Yellen's concern is most likely grounded in the significant… Read More …