Janet Yellen delivers the Humphrey-Hawkins testimony


Mar. 6 2015, Published 6:25 p.m. ET

What is the Humphrey-Hawkins testimony?

The chair of the FOMC (Federal Open Market Committee) presents the Humphrey-Hawkins testimony to Congress twice a year, in February and July. In this testimony, the FOMC chair reports on the situation of the economy and the Fed’s stance on monetary policy.

At the same time that the Fed releases its monetary policy report, the chair delivers testimony to two congressional committees: the House Banking Committee and the Senate Banking Committee. During the testimony, the chair sums up the Fed’s monetary report for Congress and answers questions.

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Named after senator Hubert Humphrey and representative Augustus Hawkins, the legislation used to be called “the Full Employment and Balanced Growth Act of 1978.” It expired in mid-2000. However, the practice of issuing the monetary policy report twice in a year continues, along with the FOMC chair testifying before the two committees. Colloquially, the report is still called the “Humphrey-Hawkins report,” even though it doesn’t officially have this name.

Janet Yellen testifies

Janet Yellen, the chair of the Federal Reserve, testified before the two committees on February 24 and 25, 2015. Her prepared remarks and answers to the committees’ questions are important at this juncture, as the Federal Reserve is expected to raise the federal funds rate this year.

Several participants were disappointed by the FOMC’s adherence to “patience” in the minutes of its January 2015 meeting released in February. Though equities ended in the red on the day the minutes were released, it was primarily because energy-related stocks like ConocoPhillips (COP), Chevron Corporation (CVX), and ExxonMobil (XOM) had dragged broad-market equity indices like the S&P 500 lower. The minutes actually helped reduce the fall. ETFs like the SPDR S&P 500 ETF (SPY) and the iShares Core S&P 500 ETF (IVV) trace the S&P 500.

Treasuries were relieved, as an eventual rate hike will increase interest rates in the financial system. This will push yields higher, and thus pull prices lower due to the inverse relationship with yields. ETFs that track Treasuries, like the iShares Barclays 20+ Year Treasury Bond Fund (TLT), increased on the day the minutes were released.

In this series, we’ll look at what Janet Yellen had to say about the economy, monetary policy, and liftoff.


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