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.