Yellen sticks to Fed message:

  • No surprises in Fed Chair Yellen’s prepared remarks ahead of her testimony in front of the Joint Economic Committee this morning. In terms of monetary policy, reiterated that the FOMC determined at October meeting that the case for a rate hike had continued to strengthen and a move “could well be appropriate relatively soon”. No explicit signal for December, though none was expected given very elevated market probability (90%+) of a tightening. Also reiterated Fed expectations for a gradual tightening path. Noted assessment based on view that neutral funds rate appears to be quite low by historical standards, a dynamic evidenced by the moderate growth in aggregate spending in recent years despite support from aggressive monetary policy. Added that because monetary policy only moderately accommodative, risk of falling behind curve in near term appears limited. Yellen again discussed the perception of an economy with a bit more “room to run” Said there appears to be some scope for some further improvement in the labor market.