On Wednesday The Federal Reserve wraps up its infamous June meeting with a press conference by chair Janet Yellen.
I say infamous since the markets believed this was the meeting where Yellen was going to begin raising interest rates.
Well the Q1 GDP number of -0.7% took that off the table. And the possibility that at the end of the month with the third revision we will see -1.2% “growth” is a distinct possibility as I see it.
So what will Yellen say about the economy today?
- There’s growth in Q2: She will blame seasonal adjustments for lack of growth in Q1. Either that or she has to take the blame. Also the holiday shopping season was horrible for retail sales and that had no seasonality adjustments.
- Some stocks are frothy: With any luck we will hear what sector is a sell from the Fed chair. It’s hilarious that she always seems to mention this. The stock market is not the economy, yet she likes to comment on social media and bio techs stocks in the past.
- Strong dollar creating headwinds: Uncle Sam use to be proud of King Dollar, but now you hear it’s a problem.
- Bonds: Yellen must placate the bond vigilantes, whom want a better yield and want to see zero interest policy retired. Not to be, but she must offer an olive branch of September — knowing full well no rate rise will happen then.
- Greek Drama: She may take a shot an IMF chief Christine Lagarde here on the handling of Grexit. Just to tweak her after her Washington press conference last month where Lagarde stated the Fed should not raise rates this year.
Yellen is walking a tightrope in attempting to keep stocks lower and bond prices high. Not easy when you have no tools in your belt. But then again reporters are invited to the press conference because they are on the same team with the Fed for the most part, so I don’t expect Yellen will be prodded too much during the Q&A.
I would like to know what see knows about the Treasury auction rigging probe by Justice Dept. and if the Fed asked for an investigation. But I don’t think it will come up.
At the end perhaps the Fed will play “See You In September” as her exit music.