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Goldman's Yellen Press Conference Post-Mortem: "Few Surprises"

Via Goldman Sachs' Jan Hatzius,

BOTTOM LINE: There were few surprises from Fed Chair Yellen's post-FOMC press conference.

MAIN POINTS:

1. Yellen made two slightly dovish remarks on labor market developments. First, she stated directly that she felt the slow increase in wages was indicative of labor market slack. Second, she said that her own personal view was that there was a "meaningful" cyclical shortfall in participation, when asked about a recent paper by some Fed authors indicating otherwise.

2. On the topic of "considerable time," Yellen declined to provide any specificity on what the phrase means with regard to calendar duration, and instead noted that the guidance should not be viewed as calendar-based or mechanical in nature. She stated that in her personal view, it was not "completely clear" that there was a gap between market pricing and participants' projections for the fed funds rate apparent in the SEP. For example, the discrepancy could be due to the difference between modal forecasts (reflected in the SEP) and average expectations (reflected in market pricing).

3. Yellen also took the opportunity to downplay the move up in the SEP dots, stating that she "would describe the change in the projections as quite modest."

4. Finally, she stated that two dissents was not an "abnormally large number," suggesting that she is not particularly uncomfortable with the current degree of dissention on the Committee.