Yellen repeats Fed is close to meeting targets, USD up

19 January, 2017

The speech by the US central bank governor Janet Yellen did not offer any new insights on the attitude of FOMC, nor did it cause large shifts in the pricing of future rate hikes (even if now 3 rate hikes in 2017 look again more probable than only one, with 2 remaining the most expected outcome).

Here are the most important expressions she used:

  • next reate hike depends on the performance of the economy ’over the coming months’ (the markets assumed that Fed will delivered the tightening mostly in 2H of the year, and for now will wait for the fiscal stimulus to take some shape, this remark suggests that the time to the first hike may be shorter than expected)
  • she and most of her FOMC colleagues expect a few rate hikes this year (the dot chart median says 3) and over the next 3 years
  • wage growth remains fairly low and Fed needs to make sure the economy is strong enough to handle rate hikes 
  • policy divergence puts pressure on USD, Fed pays attention to this, but the US had stronger and faster recovery than peers

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