The single most important takeaway for the financial markets from the Federal Reserve Chair Janet Yellen’s testimony before congressional senate and banking committee was that the Fed Chair remains open to rate hikes in March. Though she cited the high level of uncertainties surrounding the economic policies under the Trump administration, she said that delaying rate increase could put the Fed behind the curve and may lead to very rapid rate increases later on. She said, "Waiting too long to remove accommodation would be unwise…….. At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.” Though she didn’t mention the number of hikes for the year or if it is coming in March, her strong hawkish comments made it clear that March hike is definitely on the table.

However, her comments do not force us to make any changes to our  Fed Dove/Hawk board as she had previously said, “Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road……either too much inflation, financial instability or both.”

This is how our Fed Dove/Hawk board looks like,

• Doves – Lael Brainard, William Dudley, and Neel Kashkari.
• Hawks – Janet Yellen, Charles Evans, Patrick Harker, Stanley Fischer, and Robert Kaplan
• Unknown – Jerome Powell

Pls. note that one of the dovish members, Daniel Tarrullo has resigned and the position is yet to be filled.