Dovish Comments By Fed Officials Help Stocks Rise Higher

movinU.S. stock indexes are rising modestly in early trading on a day which has light economic data as investors wait for further signs that conditions in the economy look favor for growth while eyeing the U.S. central bank’s monetary policy to remain accommodative and hold back on raising rates until the economy picks up and shows more progress.

Tomorrow the Fed will release their minutes from their last March meeting that already saw Fed members surgically remove the “patient” word from their Fed statement about raising interest rates.

Yesterday the Dow jumped 116 points along with other indexes that rose throughout the day, bolstered by dovish comments from Federal Reserve of New York President William Dudley, a voting member of the Fed, known for being move dovish and accommodative with Fed policy.

Dudley gave a speech yesterday at the New Jersey Performing Arts Center in which he said that his outlook for 2015 growth is close to the pace of the past two years, “supported by continued solid fundamentals and accommodative financial conditions.”

Later in his speech, Dudley said that the pace of growth in the job market has slowed in recent months from the strong pace at the end of 2014.

“Nonfarm payroll employment increased in the first quarter by about 200,000 per month, well below the pace of the fourth quarter. This slowdown was broad-based, with job growth slowing in both the goods-producing and the service-providing sectors” Dudley said.

After pointing to the weak employment report for March that saw job gains fall sharply below 200,000, Dudley said its another indicator that the first quarter of 2015 looks to be quite weak and cited among other risks a 15 percent exchange appreciation of the U.S. dollar since mid-2014.

Dudley believes that inflation will firm this year and said “most of the impact from the decline in energy prices that has weighed down overall inflation is likely over.”

Admitting that the timing for a rate hike is data dependent on how the economic outlook evolves, Dudley emphasized that removal of “patient” from the statement does not indicate that we will be “impatient” to begin to normalize monetary policy and pointed to Fed Chair Janet Yellen’s remarks that echoed that opinion.

Narayana Kocherlakota, Fed President Bank of Minneapolis, a non-voting Fed member, made some uber dovish remarks today in a speech before the Bismarck-Mandan Chamber of Commerce and noted that the Fed should wait until the second half of 2016 to raise interest rates.

-John Schweitzer

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