The highlight of Yellen's Q&A session with reporters was her response to a question related to the timing of the Fed's first rate hike. The central bank currently has its key short-term rate pegged at roughly 0%, a historically low rate that has been credited for the stock market's massive advance in recent years.
Yellen said the first rate hike could come as early as "six months" after the end of the Fed's bond-buying program, potentially pushing forward the first rate hike to April or June of next year, as opposed to the late-year 2015 start point investors were expecting.
FED MEETING: Central Bank changes guidance on raising rates
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Whether it was a gaffe on Yellen's part or simply a translation problem on Wall Street's behalf, the comment caused a spasm of confusion on Wall Street and sent
stock and bond prices spiraling lower
late yesterday afternoon.
It also knocked Yellen's performance grade down.
Edward Yardeni, chief investment strategist at Yardeni Research, who has dubbed Yellen the "Fairy Godmother of the Bull Market," said the new Fed chief "didn't sprinkle any fairy dust on the bond and stock markets yesterday."
Instead, the new "fuzzier" guidelines and Yellen's answer to the question on the timing of rate hikes caused confusion, he says.
"In my opinion, Yellen confused herself and all of us too," says Yardeni.
That, he says, caused him to give Yellen a below-average, but not failing grade.
"All in all, my evaluation is that Janet Yellen's first shot at communicating Yellenomics rates a grade of D," Yardeni said.
While the first-ever female Fed chair did "reasonably! well" in her first give-and-take with financial journalists, and was in a "difficult position" to clearly articulate the central banks's new forward "guidance" related to coming rate hikes, Yellen's performance was not error-free, says David Kelly, chief global strategist at JPMorgan Funds.
"She probably did err by mentioning the six months (time frame)," says Kelly, which he noted was not specifically cited in the Fed's post-meeting statement. "She muddied the timing of the first hike. If you want to say six months, put it in the statement. Say what you want to say in the statement. And stick to your guns."
Transparency and openness is good but opens the door to differing interpretations of what message the Fed is trying to communicate.
"Stocks hate uncertainty and there's now more uncertainty as it pertains to the path of interest rates," says Kelly.
Not everyone on Wall Street gave Yellen a below-average grade, however.
Yellen didn't "slip up at all," says Mike Materasso, senior vice president and co-chair of Franklin Templeton's Fixed Income Policy Committee.
He stresses that while Yellen's overall message was dovish (or favoring rates staying lower for longer to support the economy and job market), the market got spooked by higher projections from individual members of the Fed as to where rates will be a year or two from now, says Materasso.
The median Fed forecast for the central bank's target interest rate, for example, rose to 1% by the end of 2015, up from December's projection of 0.75%. Similarly, Fed members see short-term rates at 2.25% by the end of of 2015, up from 1.75% prior.
In short, the volatile market reaction Wednesday occurred for a simple reason, Materasso says: "What happened was the Fed thinks the economy is doing well and will continue to do well, and that means higher rates. It's pretty simple."
What's clear is that future Yellen comments will be scrutinized even more closely, experts say.
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