Fed Chair Yellen hints dovish note at US semi-annual testimony

Federal Reserve Chairperson Janet Yellen hinted at a dovish note while speaking at the United States semi-annual testimony on Capitol Hill on Wednesday. The chairwoman said that the Fed would remain cautious on raising interest rates, ahead of Thursday’s Brexit referendum, closely eyeing the event.

Yellen further went on to mention that the uncertainties that are facing the US economy, in terms of slow growth in employment and subdued inflation, creates cause of concern to watch global events closely, before acting on interest rates. Her testimony was closely similar to her June 6 speech at the Federal Open Market Committee meeting, where she mentioned concern over consumer spending growth in real terms that has slowed despite what seemed to be still-robust underlying fundamentals.

The April retail sales report turned the tide, setting the stage for a solid rebound in growth in the spring. The Fed seems to remain fairly optimistic about the economic growth of the country. Business investment remains soft, but household spending looks to be back on track, housing is solid, and the drag from net exports is likely diminishing. Meanwhile, the periodic concerns emanating from the unsteady global picture for the moment have receded, at least for now.

Furthermore, the Fed Chair remains optimistic over the country’s labor market, saying that the May employment report should not pose thoughts of concern over the economy’s overall growth agenda. She also mentioned that "it is important not to overreact to one or two reports".

The FOMC expects consumer prices to hover around 2 percent over the near-to-medium term. Yellen noted that as the drag from falling energy prices and lower import prices fade, inflation should move up from current levels toward 2 percent. Meanwhile, she also mentioned that there are tentative signs that the wage growth may finally pick up in the short term.