Yellen's two-day testimony wrapped up - ANZ

Analysts at ANZ summed up Yellen's two-day testimony.

Key Quotes:

"FED #1: Chair Yellen’s Senate testimony was similar to yesterday. However, she did say that there will be a rise in long-term market rates during the balance sheet run off and that the Fed will factor in the yield curve when setting the funds rate. So eyes are on overall financial conditions.

FED #2: Governor Lael Brainard’s speech was similar to her 11 July commentary, erring on the side of caution. She noted that she is most focused on getting inflation back up to 2%. Dallas Fed President Kaplan also published an essay overnight which was also on the dovish side. Notably on inflation he said “I intend to be patient in critically assessing upcoming data to evaluate whether we are continuing to make progress in reaching our inflation objective...I would like to see some greater evidence that we are making progress toward meeting our 2 percent inflation objective in the medium term.” However, he “believe[s] it will likely be appropriate to begin the process of balance-sheet reduction sometime later this year.”

TROUBLE: What was notable out of Chairman Yellen’s talk was a reference to the US economy having trouble growing at 3%. That’s an implicit swat at productivity growth, which for a lot of nations is half what it was prior to the GFC. That’s not an environment for high returns."