Peter: Yellen speaks but says nothing new
There was nothing new at all out of Yellen’s speech today. She expects rates to rise this year but repeats again that the pace of gains after the first hike will be gradual. Again we hear “actual course of monetary policy to be determined by incoming data.” She repeats what was said in the April FOMC minutes that the Q1 slowdown was ‘transitory’ and she expects “the economic data to strengthen” from here. On the labor market, she believes it is “approaching full strength but not there yet” and the “pace of wage growth has been generally disappointing” but she saw “some encouraging signs” of a pickup. She cheered lower oil prices by saying that the positives outweigh the minuses but at the same time she is confident and still wants inflation to move back towards 2%.
With respect to today’s CPI figure, I’m sure today’s speech was unaltered in response and who knows if she actually has seen the details yet. US Treasuries are about where they were just prior to the release as again, nothing new was revealed. The Fed continues to express a blatant fear of raising rates, even by just 25 bps.