"We'll get additional perspective this week when new Fed Chair Janet Yellen provides her testimony to Congress, but we expect the central bank will stick with its policy"
- Russ Koesterich, global chief investment strategist at BlackRock
On Tuesday global investors will be keeping a close eye on Capitol Hill, where the newly installed Federal Reserve chair Janet Yellen testifies for the first time before Congress on monetary policy and the U.S. economic outlook. Those anticipating Yellen to say that recent weak economic data could force the central bank to slow down or even halt its tapering of asset purchases are likely to be disappointed, as the Fed head's testimony is unlikely to provide any surprising news concerning the central bank's schedule to reduce its monthly asset purchases in the foreseeable future. Nevertheless, she might provide further details about how the Fed will manage the exit strategy, which most analysts expect to commence sometime next year. This is could be the issue that will shape Yellen's leadership at the Fed—pulling the central bank back from historic intervention in the markets.
Additionally, Yellen's testimony is of particular interest as it comes on the heels of two disappointing monthly jobs reports. Also, one of the more important questions is whether Yellen will indicate the Fed's dependence on the economic data or reiterate prior guidance that the federal funds rate would be kept at current levels for a considerable period after the end of tapering.
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