Yellen’s testimony suggests a June rate hike is on the cards: Capital Economics

Quotes from Capital Economics:

- Chair Janet Yellen's prepared congressional testimony on Tuesday suggests that the Fed is on course to begin raising its policy rate at the June FOMC meeting. She noted that "considerable progress has been achieved in the recovery of the labour market", while her comments on international economic conditions were also a little more upbeat than before. 

- Yellen gave a clear steer that the Fed is close to dropping the language that it can be "patient" about starting to normalise interest rates. Mirroring the tone of the January FOMC minutes, she warned that dropping the "patient" language at the upcoming March FOMC meeting wouldn't mean that rates were then guaranteed to rise in June. But we suspect that is the conclusion that the markets would reach. 

- Overall, the Fed is clearly getting close to the first rate hike, which we expect in June. Beyond that, we anticipate that rising wage and core price inflation will prompt the Fed to hike the fed funds rate to between 1.00% and 1.25% by end-2015 and 2.75% to 3.00% by end-2016.