Janet Yellen is about to deliver her semi-annual testimony to the Congress. While this will take place at 3pm BST, we already know her introductory statement. Here are the main points and the analysis will follow:

  • rates will not have to rise much to be at neutral level (sounds like a dovish remark and could be US dollar negative)
  • a process of balance sheet normalization to begin this year
  • inflation below the target and has declined recently, FOMC pays a close attention to inflation developments
  • growth is picking up, investments have recovered
  • strong labour market should encourage wage, price increases
  • odds around economic growth seem to be roughly balanced

Overall this statement could be perceived as neutral with a slight dovish tilt. Comments on the economy and inflation seem to be neutral, remarks on balance sheet could be slightly positive but then a repeated remark on limited scope for more rate hikes could more than outweigh this balance sheet comment. 

US dollar has declined slightly just after the release and remains under pressure. 

A detailed analysis will follow.