Today, in testimony before Congress, Fed head Janet Yellen was asked about the possibility of a U.S. economic recession. She admitted that financial markets are increasingly worried about a recession but, “we’ve not yet seen a sharp drop-off in growth either globally or in the United States,” she says.
Still, global financial developments “bear close watching,” she continued, and “may have implications for the outlook.”
Yellen said that she doesn’t expect the Fed to “soon” be in the situation where it must cut rates. She added, there's “always some risk of a recession.”
Here is a key excerpt from yellen's prepared remarks:
Yellen also doubled down on her #Deflation is "transitory" message.
Below is a chart of the CRB Commodity Index in the past year. What's so transitory about this?
Did Yellen forget about 0.7% Q4 GDP growth?
On the economic cycle, our US GDP forecast (predictive tracking algo that has nailed GDP for 5 quarters, in a row) is at 0.2% GDP growth for Q1 (the Atlanta Fed is still 10x higher than that and our friends are still at “it feels like 3% GDP”).
And yet the stock market is up on Yellen's remarks. As Hedgeye CEO Keith McCullough continues to reiterate, "The biggest risk in financial markets today is believing the Fed's economic forecast."