Steen Jakobsen, chief economist and CFO for Saxo bank pinged me this morning with the Bloomberg headline Yellen Signals Rate Path Hinges on Whether Turmoil Persists.

Steen suggested the alternative headline “Yellen and Fed in Denial“. I added the word “total”.

Key Ideas

• Yellen expects to raise interest rates
• Financial conditions less supportive of growth
• Uncertainty over China growth and exchange policy has exacerbated concerns
• Too soon to tell if volatility, oil prices and bond yields is passing or headed deeper
• Lower fuel prices and steady job growth should boost household spending
• Inflation will eventually move back to 2% range

Steen writes “This is bad news for RISK. It will take time before full reaction is out as testimony will give more color.”

Sticking to Her Guns

“She is holding to her guns,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. “The financial market turmoil is not going to make them reverse course. It could have an effect on the pace at which they normalize rates, but they are still committed to normalizing rates.”

With her testimony on Wednesday, Yellen joined Vice Chairman Stanley Fischer and other senior Fed officials in declaring it’s too soon to tell whether sharp drops in stocks, oil prices and some bond yields represent passing volatility or reflect worsening global economic fundamentals that will dampen growth and inflation in the U.S.

Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York, said Yellen’s remarks suggest the Fed is prepared to postpone, but not cancel, its plans for higher rates.

The above snips from Bloomberg.

Big Yawn

The bond market let out a big yawn to Yellen’s yap. Odds of a rate hike in March are still 2%, interest rates did not budge, and oil today is hovering near $28 a barrel.