Quick take on Yellen from CIBC World Markets.
Yellen took quite an upbeat view of the economy, stating that the economic data should strengthen after a number of factors including weather, the port strike and declines in energy investment impacted growth in the first quarter. And while she said that "we are not there yet" in terms of reaching their labour market goals, she said that if the economy improves as expected then a first rate hike would be warranted at "some point this year".
But she also once again stressed that rate hikes after the first move would be very gradual and that it could be "several years" before the Fed funds rate would be back to levels that would be expected over the longer term. This was already highlighted in the Fed's "dot projections", with the median forecast for the end of 2017 still below what members thought to be the long-term equilibrium.
Even though Yellen sounds reasonably confident that economic conditions will strengthen in a way that makes a hike appropriate this year, the market had already been moving in that direction today following the slightly stronger than expected core CPI release. As such her comments are likely to be met with limited reaction.
Check out eFX Plus for trade recommendations from brokers.
