Fed will change forward guidance before raising rates
Link to Fed Yellens written testimony:
- New guidance not necessarily talking about the next couple meetings
- "Patient" means liftoff unlikely for couple of meetings
- Fed will raise when reasonably confident on inflation
- At some point liftoff will be meeting by meeting basis
- Balance sheet reduction mainly via halting reinvestment
- Fed reduce balance sheet gradually
- GDP strong enough to gradually lower jobless
- Lower oil prices significant net plus for US economy
- Foreign developments could pose risks to US economy
- Lower bond yields partly reflect weakness overseas
- Euro area faces risks
- Inflation to fall further near-term
- Expects inflation to gradually rise to 2%
- Improving jobs and fading oil impact to lift prices
- Stock market valuations somewhat elevated
- Commercial real estate valuation pressures may have risen
The US dollar has gotten a slight boost off the prepared text headlines.
The EURUSD fell about 45 pips. The USDJPY rose by about 25 pips.