This has been an interesting week with Fed Chair Janet Yellen testifying in front of a joint committee of Congress about monetary policy.  This is a bi-annual meeting where lawmakers ask the Chair about policies, concerns, fiscal ideas, and other areas helpful to lawmakers. 

This week’s “meeting of the minds” had everyone’s eyes/ears glued to Yellen – would she give a hint about rate hikes?  Last week’s January Fed meeting minutes were completely dissected, but nothing was abundantly abstract.  The message was clear and to the point – there was a discussion about the timing of rate hikes.  If that is surprising to anyone, then they have not been paying much attention lately to the economy or the chatter about Fed policy.

For nearly six years, the Fed has implemented a very generous monetary policy as a hedge against the financial system falling off a cliff.  Along with a QE strategy, they have kept rates at/near zero the entire time, until such time the economy could demonstrate some escape velocity and be on a normal path of an economic cycle.  Safe to say, they accomplished their mission, albeit fraught with worry and doubt as they moved into uncharted waters.  The question is when, not if – and many are trying to time it.  Not a very good exercise in my book.

But what’s interesting about the guessing game exercise is that it is truly unnecessary.  Chair Yellen repeated over and over this week that the data will be the clue as to a change in monetary policy (tightening would be next).  In fact, that same message has been delivered for many months, so why deviate now?

I have faith the Fed will take the most appropriate action when the time comes, as their timing bets have been consistent to this end since the financial crisis (in my view).   Opinions about the outcome abound, and just the other day, former Fed Chair Alan Greenspan noted “a significant market event is – coming, something big is about to happen”, but he’s been like the “boy who cried wolf” for a few years now, not ever believing he was once responsible for leading the wolf to the flock without much transparency.

I’m not sure exactly what he is predicting or is referring to, but this Fed seems far more willing to be transparent and open with everyone.  Give them the nod for being fair.

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