Financial Policy Best Practice Framework

On March 18th 2014 the US Federal Reserve Chair Janet Yellen stated the need for “reasonable confidence” in order to effectuate a more conservative monetary policy focusing on interest rate raise.  Chair Yellen has indicated four macroeconomic factors that need to be further monitored.

• The labor market with further unemployment rate decline;

• A continued rise in currently slumped wages;

• Core inflation stabilization (independent of energy ‘push’);

• A higher “market-based” expected inflation rate.

The Fed’s decision to hold off on short term rate hikes comes one week after its macroprudential bank stress tests. Notable amongst the results was the “conditional approval” of Bank of America’s capital plan, with complete rejection of Deutsche Bank and Santander’s capital plans.

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