Federal Reserve Chair Janet Yellen speaks to Congress on interest rate expectations in 2015. The US looks to conclude its consideration of the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership. Bank of Japan releases January monetary policy meeting minutes. All in this week’s GRI Weekly Risk Outlook.
U.S. Federal Reserve Chair Yellen to Deliver Remarks to Congress
On February 24 and 25, Federal Reserve Chair Janet Yellen will speak to the Senate Banking and House Financial Services Committees on the semi-annual monetary policy report and economic forecast.
With CPI inflation figures for January to be released following Yellen’s testimony, expect her to be grilled in the House and Senate from the left and the right on both the timing and degree of 2015 rate hikes, which the Federal Reserve has struggled to articulate without causing significant market disruption.
One particularly interesting development to be watched carefully is talk of auditing the Federal Reserve among members of Congress, particularly in the House.
Although it is very unlikely that Congress will secure sufficient support from the President in favor of such strong and likely destabilizing oversight of the Federal Reserve by the legislative branch, middle ground options (such as requirements for greater transparency or appointment of the New York Federal Reserve President by Congress) are possible.
U.S. Senate Likely to Move Forward on Trade
Senate Finance Committee Chairman Orrin Hatch (R-UT) has announced that the committee will hold a hearing onThursday to provide President Obama with the authority to conclude the 12-country Trans-Pacific Partnership (TPP) and US-EU Transatlantic Trade and Investment Partnership (TTIP) negotiations, followed by a markup of the bill either on Thursday or Friday.
It will be important to watch Ranking Member Ron Wyden’s (D-OR) comments on the TPA bill, particularly as he has often served as a major pro-trade Democratic surrogate in Congress.
His recent comments suggesting that moving forward on this bill would be “premature” could pose problems for the Obama Administration in trying to get significant support from his own party for his major trade policy initiatives.
Despite push-back from Congressional Democrats, GRI expects the legislation to move forward relatively quickly, with enough time to conclude the $1 trillion TPP negotiations in 2015.
Bank of Japan Set to Release January Minutes
The Bank of Japan will release the minutes of its latest monetary policy meeting. Although the Bank has expressed an interest in bringing the inflation rate of the yen to 2% to expand the Japanese economy, most market analysts believe this goal unlikely to be met in the near future, and that the Bank will in fact lower its inflation forecast for the fiscal year from 1.7% to 1%.
Hong Kong is also expected to release its CPI numbers this week, and its 4th quarter GDP growth rate on Tuesday. Many of the numbers that have come out of East Asia over the past few weeks have highlighted a slowdown in the region’s economies – including weak consumption figures in Japan, falling manufacturing in China, and Malaysia’s recent cut in 2015 growth estimates – leading GRI to expect Hong Kong and Japanese figures to continue this trend.