Fed’s Janet Yellen Weighs on Economy After Dismal NFP Figures

Talking Points:

• Fed Chairman Yellen is the last member to speak before June 15th FOMC meeting
• Yellen noted the dismal May NFP figures, said other labor indicators showed strength
• The Chairman also echoed Brainard’s caution on Brexit and Chinese rebalancing

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The US Dollar spiked higher moments after the content of Fed Chair Janet Yellen’s Monday speech crossed the wires. In her statement, the central banker addressed the disappointing Non-Farm Payroll figures (the smallest increase in jobs since August 2011) that were released last week, and what they mean for the Fed’s outlook. Her comments echoed those of Loreta Mester, who spoke on Saturday suggesting a single month’s figures should not be given too much weight. The Chairwoman also noted that other labor market indicators have been more positive, such as data suggests wages may finally be picking up.

With regards to other risks to the rate path, Yellen cited the potential fallout from the Brexit, as well as the challenges facing China during its rebalancing. In her speech, the Chair remained vague on the timing of the tightening path as she maintained that it will be gradual. After last week’s NFP numbers, the probability of a hike at the next meeting fell from 22 to 4 percent. After Yellen’s speech today, that number fell further to 2 percent. Given the drastic shift in market expectations since Thursday, today’s speech drew a much more attentive market. Yellen will be the last Fed official scheduled to speak before the week-long blackout period prior to the June 15th FOMC meeting.