Yellen, in an important sequence in her semiannual testimony to Congress, according to WSJ's Jon Hilsenrath, tipped her hand to the benefit of raising short-term interest rates sooner rather than later.
If the Fed waits much longer to raise rates - as some institutions like the IMF want it to do - it might be forced to move aggressively once it starts. However, if it moves sooner, that could allow it to proceed gradually and observe how the economy and markets respond.
"An advantage to beginning a little bit earlier is that we might have a more-gradual path of rate increases." A gradual path, she added, is a "prudent approach to take."
As Hilsenrath concludes, that adds weight to the argument the Fed might move rates for the first time in September, and explains why long-term bond yieldsd and stocks just rolled over...
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So to summarize this outright inconsistency - The Fed (to a man or woman) swear up and down that all rate hikes will be slow and gradual and data dependent and yet here she is saying that unless they move sooner (rather than later) they may have to raise rates considerably more aggressively (but how does the Fed know what the data will be?)
On other words - The Fed already knows the lessons the Chinese just learned - once you lose control, it's all over!
