by Calculated Risk on 2/11/2014 06:55:00 PM

A great review of Fed Chair Janet Yellen's testimony today from Tim Duy: Yellen's Debut as Chair. A few excerpts:

Janet Yellen made her first public comments as Federal Reserve Chair in a grueling, nearly day-long, testimony to the House Financial Services Committee. Her testimony made clear that we should expect a high degree of policy continuity. Indeed, she said so explicitly. The taper is still on, but so too is the expectation of near-zero interest rates into 2015. Data will need to get a lot more interesting in one direction or the other for the Fed to alter from its current path.
...
Her disappointment in the [employment] numbers raises the possibility - albeit not my central case - that another weak number in the February report could prompt a pause. My baseline case, however, is that even if it was weak, it would not effect the March outcome but instead, if repeated again, the outcome of the subsequent meeting. Remember, the Fed wants to end asset purchases. As long as they believe forward guidance is working, they will hesitate to pause the taper.
...
Yellen reiterates the current Evans rule framework for forward guidance, giving no indication that the thresholds are likely to be changed. Jon Hilsenrath at the Wall Street Journal interprets this to mean that when the 6.5% unemployment rate threshold is breached, the Fed will simply switch to qualitative forward guidance. I tend to agree.

Bottom Line: Circumstances have not change sufficiently to prompt the Federal Reserve deviate from the current path of policy.

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index. This index has been weak lately.

• At 2:00 PM, the Monthly Treasury Budget Statement for January. The CBO estimates that the Treasury ran a deficit of $10 billion in January.