Fed Chair Janet Yellen's prepared remarks confirm her previous stance that they will keep normalizing their policy stance (no matter what), bringing forward the timeline for unwinding the balance sheet, and adding that "rates won't have to rise much further to get to neutral." This seems like a 'dovish' tilt, and judging by the reaction in stocks (higher) and the dollar (lower) it agrees.
Here is the key line the market is focusing on:
Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance.
Is this a warning that the Fed's dot plot is about to revised well lower than its terminal 3.0% rate, if indeed the Fed is starting to get worried about r*? Perhaps, although she gave herself a loophole
Key headlines:
*YELLEN SAYS INFLATION RESPONSE TO ECONOMY IS KEY UNCERTAINTY
*YELLEN SAYS FED MONITORING INFLATION DEVELOPMENTS CLOSELY
*YELLEN: JOB GAINS, GROWTH SHOULD FOSTER WAGE AND PRICE GAINS
*YELLEN: RATES WON'T HAVE TO RISE MUCH FURTHER TO GET TO NEUTRAL
*YELLEN: ODDS AROUND U.S. ECONOMIC OUTLOOK ARE ROUGHLY EQUAL
*YELLEN SAYS INFLATION RUNNING BELOW GOAL, HAS DECLINED RECENTLY
*YELLEN: U.S. FISCAL POLICY ANOTHER SOURCE OF UNCERTAINTY
*YELLEN: INVESTMENT HAS TURNED UP, GROWTH ABROAD STRENGTHENING
*YELLEN SEES MODERATE GROWTH PACE CONTINUING NEXT FEW YEARS
*YELLEN: LONG-RUN NORMAL SIZE OF B/SHEET STILL TO BE DETERMINED
*YELLEN: FOMC EXPECTS TO BEGIN SHRINKING BALANCE SHEET THIS YR
*YELLEN: FED DOESN'T EXPECT TO USE B/SHEET AS ACTIVE POLICY TOOL
*YELLEN: ADDITIONAL GRADUAL RATE HIKES NEEDED IN NEXT FEW YEARS
Full Read Here http://www.zerohedge.com/news/2017-07-12/yellens-dovish-turn-concerned-about-inflation-sees-not-much-room-rate-increase
