Key highlights driving the markets this week
One of the most important highlights this week was Fed Chair Janet Yellen’s semi-annual monetary policy testimony before the Senate Banking Committee in Washington on Tuesday and Thursday. The new Fed Chair’s testimony revealed little in terms of change to the monetary policy course followed by her predecessor, Ben Bernanke.
The Fed Chair stated that she strongly supports current monetary policy and that the tapering process, started by the Fed in December 2013, will continue. She also said tapering wasn’t on a pre-set course and was contingent upon meeting the economy’s long-term goal of full employment along with the Fed’s long-term inflation target of 2%.
Other major indicators released this week (until Thursday) included the following.
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The Treasury’s budget deficit for January was also announced on Wednesday. The deficit came in at $10.4 billion, which was lower than the consensus estimate of $30.8 billion. The deficit for the first four months of the FY (October to January) at $144 billion was almost 37% lower year-on-year. An increase in the Treasury’s surplus or deficit will determine the future supply of government bonds issued by the Treasury.
A coincident indicator, the Index of Industrial production and capacity utilization figures for December, will be released by the Federal Reserve on Friday.
For more on what Fed Chairman’s first monetary policy testimony means for the fixed income markets, continue to Part 2 of this series.