Janet Yellen speaks about inflation, uncertainty and monetary policy at NABE conference in Cleveland. Prepared speech seems to be a little hawkish, although she reiterates moderate approach to raising interests rates:

  • FOMC still expects inflation to stabilize around 2%
  • Persistently easy policy can hurt financial stability
  • Low inflation likely reflects factors that should fade
  • Gradual approach appropriate due to subdued inflation
  • She sees risks of overheating without modest hikes over time
  • Imprudent to keep policy on hold until inflation at 2%
  • Uncertainty strengthens case for gradual tightening
  • Fed should be wary of moving too gradually

She described in her speech a complex look at inflation, pointing that she and her colleagues may have misjudged the strength of the labour market. The degree to which longer-run inflation expectations are consistent with their inflation objective or even the fundamental forces driving inflation. Nevertheless, she sounds at least a little hawkish which should be interpreted positively for the greenback.

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The dollar strenghtened immediatelly after publication of Yellen’s speech, but after that market unwounded this move. On the chart we can see a retest of two important moving averages and vicinity of important level of 1,1900. Source: xStation5