Federal Reserve Chair Janet Yellen speaks Tuesday US time. This via eFX
PREVIEWS
Barclays:
We expect Chair Yellen to reiterate her message that the ecnomy is close to full employment and inflation has risen, but remains short of the Fed's target.
We think she will refrain from explicit comments on fiscal policy. If pressed on the issue, we expect her to say that that expansionary fiscal policy when the economy is at full employment is likely to lead to more regular rate hikes, although she will emphasize that the removal of accommodation is still likely to be gradual and will ultimately depend on the details of the fiscal measures that will be implemented.
BofA Merrill:
Fed Chair Yellen will be appearing before Congress in the semi-annual monetary policy testimony. We expect her prepared remarks to sound similar to her most recent speech, noting that the labor market has tightened and wage pressures are increasing modestly. She will likely note that the Fed is making progress toward its mandate of full employment and price stability with core inflation approaching the target.
However, we expect Yellen to reiterate that the Fed must proceed with a gradual hiking cycle since rates are still close to the effective lower bound and that long-term rates are structurally lower. In the Q&A session, we expect the focus to be on the debate over rules-based policy vs. discretion, the Fed's independence and proposed fiscal policy. Yellen is likely to defend the Fed's independence and reiterate that fiscal stimulus is helpful, but that it depends on the design, especially given high debt levels.
*Times reported are local NY time.
