In a few short minutes, Fed Chairmanwoman Janet Yellen will hold the first part of her two-day testimony in Congress before the Joint Economic Committee (followed by testimony before the Senate Budget Committee), in which she will regale members of congress with tales about harsh weather in the first quarter, and who snow managed to subtract over $50 billion from the US economy in Q1. Yellen’s prepared remarks will likely focus on the FOMC’s broader views on the economic outlook, but the Q&A will be equally as important. It is possible she may be asked by Senate Committee members for more clarity on the Fed’s exit strategy and/or its view on the terminal funds rate. It is unlikely that she will say anything too market moving, especially since Goldman has schooled her how to avoid any "firm" calendar commitments of the "6 month" variety.
As Deutsche Bank notes, "She will be encouraged by the recent mix of stronger data, subdued inflation and a very well behaved bond market. However, with the market rate expectations even more dovish than the median FOMC dots, if anything there is still more risk that she is less dovish than the market has priced in, and if anything fractionally more USD friendly, but this will be subtle and not her intention, and therefore unlikely to support the USD on a sustained basis.... other topics that will get some air time include how much weight she puts on the backward looking data versus the relative strength of the Q2 data, her view on key labour market indicators, the time gap between the end of QE and the start of rate hikes and whether the Fed Chair sees any signs of financial market excess."
- YELLEN SAYS `HIGH DEGREE' OF ACCOMMODATION REMAINS WARRANTED
- YELLEN SAYS REASONS FOR FIRST QUARTER SLOWDOWN WERE TRANSITORY
- YELLEN SAYS LABOR MARKET CONDITIONS `FAR FROM SATISFACTORY'
- YELLEN SEES `SUBSTANTIAL AMOUNT OF SLACK' IN LABOR MARKET
- YELLEN SAYS INFLATION PERSISTING BELOW 2% `COULD POSE RISKS'
- YELLEN FORECASTS FASTER GROWTH THIS YEAR THAN IN 2013
- YELLEN SAYS FINANCIAL CONDITIONS `SUPPORTIVE OF GROWTH'
- YELLEN SAYS U.S. HOUSING MARKET DATA `DISAPPOINTING'
- YELLEN SAYS `FLATTENING OUT' IN HOUSING MAY POSE RISK
- YELLEN SAYS LOW RATES MAY PROMPT INVESTORS TO `REACH FOR YIELD'
- YELLEN: EQUITIES, BROAD TYPES OF ASSETS PRICED WITHIN PAST NORM
- YELLEN SAYS LEVERAGE `SUBDUED' WITHIN FINANCIAL SECTOR
However, what most appear to be focusing on is the following quote:
"the recent flattening out in housing activity could prove more protracted than currently expected"
And for the benefit of algos, here is her full testimony summarized in a word cloud:
[9]
Watch her testimony live below:
And here are the full prepared remarks...