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Pound for pound, Janet Yellen is arguably one of the most powerful leaders in the world.  Twenty-five months ago, this diminutive economist became Chairman of the Federal Reserve, succeeding Ben Bernanke.  One of his priorities was increased transparency for the Fed, by encouraging Board members to give speeches and to stimulate intellectual discussion.  Of course, the public simply got confused — listening to both hawkish and dovish Board members.  What was the Fed really going to do?

Tuesday, Chair Yellen spoke before the New York Economics Club and slammed the door on that confusion.  She made it clear that SHE speaks for the Fed!  As soon as her speech was released, the stock market started rising.  Single-handed, she created billions of dollars in increased wealth for investors.  Thank you, Dr. Yellen!

Additional confusion revolved around how many times the Fed would increase interest rates this year.  When they increased rates last December, for the first time in seven years, they expected four more increases this year.  (I predicted at the time the Fed could not possibly do that!)  Tuesday, Chair Yellen acknowledged one or two rate increases was all the economy could sustain.  (She’ll be lucky to get one this year!)  Still, the stock market sees fewer interest rate increases this year as good news!

So, two good things happened Tuesday.  Confusion about whose opinion actually matters was reduced, and clarity was improved that the Fed is not obligated to four interest rate increases this year.  That’s a lot of good news.  Good job, Janet!

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