Federal Reserve chair Janet Yellen gave a speech on Friday at Jackson Hole that sparked U.S. indexes as she defended the post-crisis monetary policies of the United States but said a path forward was unclear. She said that any changes to post-crisis reforms should be “modest” as they have stabilized the banking system this decade. The Dow Jones Industrial Average, S&P 500, and NASDAQ all rose on the news as did oil and gold. Though rises in oil prices were also largely due to the incoming Hurricane Harvey which is threatening major oil refineries on the East Coast.
“Any adjustments to the regulatory framework should be modest and preserve the increase in resilience at large dealers and banks associated with the reforms put in place in recent years,” Yellen said on Friday. Yellen’s term expires in February of 2018, and there have been rumours that President Donald Trump has intentions to replace her. As of today, chief economic advisor Gary Cohn, former chief operating officer at Goldman Sachs Group Inc., is the favourite to replace Yellen as chair.
Yellen defended elements of the Volcker Rule, which limits proprietary trading by banks. The Trump administration has called for reforms to this rule and has ambitions for major deregulation. We are now deep into one of the longest bull market runs in history for U.S. indexes. Yellen made clear that the administration should be cautious and keep the lessons of the past in mind to avoid another catastrophe.
