Janet Yellen goes before the Senate Banking Committee tomorrow at 10 AM ET as the first step in the process to confirm her to replace Ben Bernanke as the next chair of the Federal Reserve.
The Fed just posted the full text of her prepared remarks on its website, and gold and Treasuries are heading higher.
The charts above show the move (gold futures on the left and 10-year Treasury futures on the right).
Market participants seem to be honing in on the three paragraphs below, which may or may not include clues about the future path of quantitative easing:
Today the economy is significantly stronger and continues to improve. The private sector has created 7.8 million jobs since the post-crisis low for employment in 2010. Housing, which was at the center of the crisis, seems to have turned a corner–construction, home prices, and sales are up significantly. The auto industry has made an impressive comeback, with domestic production and sales back to near their pre-crisis levels.
We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Unemployment is down from a peak of 10 per cent, but at 7.3 per cent in October, it is still too high, reflecting a labour market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve’s goal of 2 per cent and is expected to continue to do so for some time.
For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.