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Yellen's testimony highly dovish

Wednesday, Jul 12 2017
Yellen's testimony highly dovish

The testimony released for Yellen's appearance before a House committee Wednesday morning highlighted that the Federal Reserve believes it is not that far from the neutral rate. While some strategists said the comments were not particularly new, Fed Governor Lael Brainard discussed the issue Tuesday and the market took her commentary as highly dovish. The neutral rate is the level where the Fed's benchmark rate does not either boost or hold back the economy.

"That's what the market thinks, but I think that's flawed thinking. Everything she's said before is boilerplate on the neutral rates," said George Goncalves, head of fixed income strategy at Nomura. "I feel like there's some extrapolation from Brainard's comment yesterday. People were thinking she's confirming what Brainard said. That's wrong, in my thinking. ... The Fed still thinks they're not at neutral and they'll be heading toward it. On top of that, they think it will rise further."

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