Fed chairman Janet Yellen testifies before the House Financial Services Committee in her first semi-annual report on monetary policy since taking over from Ben Bernanke. Her written testimony will be released at 14:30 and the hearing will begin at 16:00. Focus will be on her comments on the outlook for tapering of asset purchases and her description of the economic outlook and labour market following the recent disappointing data for employment and ISM. We believe she will signal a continuation of the Fed's unofficial plan to taper USD10bn per meeting but that the Fed will monitor developments closely and be flexible. We expect the bar to be quite high for the Fed to alter the current tapering course as many Fed members see rising costs of further asset purchases and are generally confident in the medium-term recovery of the US economy. The Fed's preferred tool will be its forward guidance with which it will try to steer overall financial conditions.
In between the release of the written testimony and the hearing Fed's Charles Plosser (hawk, voter) will speak at 15:00 on the economic outlook. As a hawk he is very likely to speak in favour of continued tapering.
Only few releases on the data front. In the US NFIB small business optimism is expected to stay broadly unchanged at 93.8 in January (93.9 in December). There may be some downside risk given the big drop in ISM in January.
Swedish data on tendencies for layoffs and vacancies are released today.
To Read the Entire Report Please Click on the pdf File Below