Markets wobble on Yellen’s debut

Janet Yellen's first press conference as Federal Reserve head knocked 1% off America's benchmark index.

Janet Yellen's first press conference as Federal Reserve chair was "hardly a resounding success", says Paul R La Monica on Buzz.money.cnn.com. She managed to wipe 1% off the S&P 500 and send Treasury yields sharply higher.

The Fed has said that it would keep interest rates at historic lows for "a considerable period" after it finished winding down its quantitative easing programme. Asked what that meant at the press conference, Yellen said "around six months or that type of thing".

This is hardly earth shattering, you would think, but it implied that interest rates could rise as soon as next spring, several months before the markets had pencilled in the first hike. And even though Yellen reaffirmed that rate hikes depend on "what conditions were like", the market remained fixated on six months.

Even before this, "the markets were in a tizzy" over unexpectedly early potential tightening, says Randall W Forsyth in Barron's. A Fed committee chart projecting levels of interest rates revealed a slight uptick, with the main rate seenat 1% for end-2015 from 0.75%.

But all of this is really a fuss about nothing. Yellen repeatedly said the Fed's overall intentions haven't changed and suggested that the central bank as a whole supports a more dovish policy than the interest rate projections imply.

So rates are still unlikely to rise before the second half of 2015, says Robin Harding in the FT. After mulling things over, investors seemed to come to the same conclusion late last week, and made up for lost time.

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