Will Janet jawbone too? – ANZ

Research Team at ANZ, suggests that the market will be keen to see if Yellen adds to the recent Fed rhetoric, including from key FOMC members Fischer and Dudley, who have expressed some unease with the market pricing of the fed funds rate.

Key Quotes

“Overall, comments have shifted to the more hawkish (or less dovish) side as economic and financial conditions have remained resilient in the face of uncertainty. In general, members of the Fed believe in at least one rate hike this year.

These comments have largely been ignored by the rates market. Indeed, market pricing for the September meeting is at levels similar to those just before the July FOMC decision (around 20%). This seems all the more surprising given that the economic environment was far more uncertain then – it was only one month after Brexit and the echoes of the weak May labour report were still reverberating.

On the other hand, the USD and the bond market appear to have moved counter to Fed speak with the currency lower and 10-year bonds down around 5bps to 1.55%. It’s possible the latter developments reflect the increased focus around the idea that the Fed’s long-run neutral rate is lower.”