When Federal Reserve Chair Janet Yellen spoke a little too clearly on
Wednesday about her expectations on interest rate hikes, investors
rushed to sell, and markets tanked. But on Thursday, when several key
indicators pointed toward an improving economy, investors quickly became
buyers again and the markets bounced back.
The tensions in Ukraine ratcheted up a notch or two late this week when
leaders of the nation’s Russian-occupied Crimea region said they will
hold a vote in 10 days on unilaterally seceding from Ukraine and
becoming part of Russia. Geopolitical situations of this potential
magnitude typically weigh heavily on global markets, with nervous
investors moving quickly to get risk off the table. So what’s different
this time around?
Fed Chair Janet Yellen’s testimony February 27 on Capitol Hill provided
a signal that the market wanted to hear: Policymakers are looking
closely at the data to determine if bad weather is truly to blame for
the recent weak reports on unemployment and other economic indicators.
If it’s not the weather, she said they’re open to the idea of
reconsidering the taper.
Even as the Federal Reserve approved the second round of its monetary
tapering last month, it reassured jittery investors that short-term
interest rates would remain at near-zero levels well into the future.
But the minutes from that January meeting, released to the public this
week, tell a different story.