Yellen continued to argue for gradual US rate hikes ahead - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, notes that the Janet Yellen also mentioned Brexit in her testimony to the US congress.

Key Quotes

“Nonetheless, far more attention was placed on the fact that while she continued to argue for gradual US rate hikes ahead, she also partially conceded to the secular stagnation/new normal argument that quizás, quizás, quizás this may no longer be necessary/possible. Her argument now seems to be that by going at a gradual pace the Fed will have the chance to discover if things are ‘new’ or ‘old’ normal before things get too serious.

From the market perspective, before her speech Fed Funds futures implied an 8% chance of a move in July and 30% in September; after she spoke that had moved to 10% and 30%, so clearly there was not a lot new for the market to chew on. Our Fed-whisperer Philip still sees a first hike this year as likely in September with another to follow in December, albeit with risks being to the downside.”