Fed Chair Yellen July testimony, more upbeat than usual

In the July semi-annual Monetary Policy Report to Congress, Chair Janet Yellen reiterated the message from her speech on Friday that a first fed funds rate hike this year is likely to be appropriate. In general, the testimony had a more upbeat tone than what we saw from Yellen at the June press conference. 

In particular, the risks to the outlook described in a more balanced way than usual, with more words spent on upside risks.

One caveat in interpreting these comments is that Fed is under significant attack from Congress on its monetary policy implementation, in particular the QE programme.

The most effective defence of Fed policy is pointing to the improvement in the US economy compared with other regions.

With this in mind, the testimony could have a bias of putting more emphasis on the positive developments in the economy and downplaying the remaining slack, says Danske bank.