Yellen says markets anticipating Fed moves can be ‘helpful complement’ to monetary policy

By David Lawder

MEXICO CITY (Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday that bond markets anticipating the Federal Reserve rate moves can be a “helpful complement” to monetary policy if participants are thoughtful about interpreting incoming data.

Yellen, speaking to reporters on a trip to Mexico, declined to comment when asked if bond markets were premature in anticipating Fed rate cuts. But she said that market anticipation of Fed decisions was part of the policy-making mix.

“The Fed obviously wants to create financial conditions that are consistent with bringing inflation down and the markets anticipate future fed moves based on their reading of incoming data,” Yellen said.

“If markets are thoughtful when reading the data, it can be helpful as a complement to monetary policy.”

Bond yields fell further on Wednesday as private payrolls data showed further cooling in the labor market ahead of Labor Department jobs data expected on Friday.

Yellen repeated her view that a “soft landing” scenario for the U.S. economy, with slowing growth and lower inflation, was on track.

“Of course, there are risks around that,” Yellen said. “And I can’t rule out the possibility that slowing could be more than is desirable. But I think I’m feeling really good about the economic outlook.”

(Reporting by David Lawder; Editing by Bill Berkrot)