3 Keys things to look for in Yellen's testimony - BAML

Analysts at Bank of America Merrill Lynch (BAML) published a brief preview of key things to look for in the Fed Chair Yellen’s testimony the House Financial Services Committee on Wednesday and Senate Banking Committee on Wedneday.

Key 3 things to look for:

“ 1.  Does she emphasize that financial conditions have continued to ease despite the Fed's steps to further tighten monetary policy? 

"In our view, Yellen has to tread carefully with this topic. She is unlikely to be as specific as the discussion in the FOMC minutes and will likely talk more casually about the fact that markets have remained strong and financial conditions have remained easy despite the Fed's recent hikes.

2. How does Yellen talk about progress toward the dual mandate?

We suspect that she will mention that the unemployment rate has been falling faster than expected, reflecting continued solid job growth and revealing a further reduction in slack in the labor market. On inflation, she will likely reiterate her comments from the press conference, arguing that the recent weakness in core measures of inflation are due to special factors and that underlying inflation pressures are building given the drop in the unemployment rate.

3. Does Yellen provide any additional details about the balance sheet policy?

We suspect that she does not provide any new information here."