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Fed Chair Janet Yellen's optimism is justified: JPMorgan strategist

  • Fed Chair Janet Yellen indicated on Wednesday she is not worried about inflation weakness. Instead, she focused more on the economy.
  • "This is the most optimistic I've heard her on growth, on the labor market, as well as inflation — willing to look through some of that recent weakness," JPMorgan's Gabriela Santos said.

Federal Reserve Chair Janet Yellen is right to be optimistic about economic growth, JPMorgan Fund global market strategist Gabriela Santos told CNBC on Wednesday.

Yellen spoke to reporters after the central bank raised interest rates on Wednesday, and indicated she is not incredibly concerned about inflation weakness. Instead, she focused more on the economy.

"This is the most optimistic I've heard her on growth, on the labor market, as well as inflation – willing to look through some of that recent weakness," Santos said in an interview with "Closing Bell."

"I do think it is justified," she added, noting that the Fed may have been overly cautious in the past.

"They're now maybe feeling a little bit more comfortable that the economy's actually much more resilient than they even realized over the past few years."

Therefore, she believes things are on track for the continuation of three rate hikes a year and balance sheet normalization, which she thinks may even begin in September.

In addition to hiking rates by a quarter point, the Fed said it will begin the process this year of unwinding its $4.5 trillion balance sheet, or portfolio of bonds that includes Treasurys, mortgage-backed securities and government agency debt.

Kourtney Gibson, head of global equity and fixed income at Loop Capital, told CNBC she liked how Yellen took away the rhetoric surrounding inflation.

The Fed chair told reporters that the weakness in inflation likely is driven by factors that won't persist, like one-off reductions in prices of wireless telephone services and prescription drugs.

"I really do think that she really kind of pushed some of those naysayers aside and, candidly, that third rate hike may just be justified," Gibson said in an interview with "Closing Bell."

Meanwhile, Jim Bianco, president of Bianco Research, thinks the Fed is almost done raising rates.

"There is maybe one more rate hike left, and then they are going to pivot to the balance sheet," he said. "The reduction of the balance sheet is another version of raising rates."

In fact, the Fed has said in the past that if it reduces the balance sheet by $500 billion, it is the equivalent of two rate hikes, he pointed out.

However, based on what the central bank said on Wednesday, "They're going to go very slow," he told "Closing Bell." "It's going to be the equivalent of about one rate hike a year."

A statement on the program said the roll-off is targeted to start this year, though no specific date was provided.

— CNBC's Jeff Cox contributed to this report.