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7 Policy Takeaways From Janet Yellen's Jackson Hole Speech

7 Policy Takeaways From Janet Yellen's Jackson Hole Speech

As month-after-month ticks by without any major action by the Federal Reserve, investors are understandable concerned that the Fed has few viable options when it comes to managing the U.S. economy. In a new report, UBS analyst Samuel Coffin addressed this concern by listing seven takeaways from Janet Yellen’s Jackson Hole speech last week on the Fed's policy toolkit:

Related Link: Here's How Traders Positioned For Yellen's Jackson Hole Speech

  • 1. The option of raising rates “proved effective last December.” Most traders expect another rate hike by the end of the year.
  • 2. The Fed will phase out near-term asset sales “at some point after the process of raising the federal funds rate is well under way.”
  • 3. The IOER will become an increasingly important tool given the massive balance sheet and near-zero long-run neutral rates.
  • 4. The Federal Reserve has the ability to purchase assets and issue guidance that will push down long rates.
  • 5. Long-run neutral rates may normalized at a lower point than their historical levels as an aging population, low productivity growth and more frugal spending habits could be permanent marks of the new economy.
  • 6. The Fed is open to looking “outside the box” for useful tools, including asset purchases and modifications to its inflation targets, but the impact of these ideas must first be thoroughly researched and understood.
  • 7. With lower interest rates providing diminishing returns at this point, Yellen emphasized the importance of more impactful fiscal policy.

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