This week, Yellen will once again takes center stage. She speaks on October 4. Furthermore, Friday the employment number releases.
Word on the street is that the number of new jobs will be impacted by the recent hurricanes. Yet, predictions for the overall unemployment rate at (4.3%) remain intact.
Last week, she said that low inflation is a mystery to her. Agreed. Any of you who honor me by reading this Daily consistently, know that I too am baffled by continuing low inflation.
Yellen believes that inflation will soon head higher. She speculates that higher wages will spark a rise in commodity prices. Perhaps. I see more geo-political and weather reasons for an inflation spurt.
Regardless, the most fascinating part of Yellen’s reign to me, is the potential termination of it. With candidates such as Ronald Lauder, Gary Cohn, John Taylor, John Allison, Richard Davis, Glen Hubbard and Kevin Warsh in the running, one wonders whether Trump will go with a hawkish or dovish Fed Chairman. (Not to mention a distinct absence of any women in the running.)
In contrast, nearly ¾ of 56 Economists surveyed, support a second term for Yellen. What would I do if I were Yellen, given an uncertain environment for her future whilst the market surges higher?
Beginning with the U.S. Dollar, a rise in rates will be bullish for the dollar. This is a double edged-sword. For Yellen, raising in December or before means more pressure on commodities as a stronger dollar makes raw materials more expensive. Nonetheless, if she is either convinced that inflation will heat up or she cares more of her commitment to reducing the balance sheet-she will raise.
Next, a stronger dollar means the cost of borrowing increases. The cost of paying back debt also increases. Real estate developers pay more to carry financing until the projects are completed. Not so good for real estate developers with huge debt to pay back, if you get my gist.
