FED chair Yellen released a statement earlier in the NY session, before appearing in front of the congressional committee to report about the state of the economy.

She confirmed that additional rate hikes are appropriate over the next years. As always, the main point of concern remains inflation. The FED is counting on an increase in productivity and an increase in the drilling activity to give a boost to wages in the US. The market now is extremely keen to read thru the numbers, as we saw last Friday with NFP that came out better than expected but with lower wages. The effect, as we now know, was a broad dollar selling seen toward the end of that day and the beginning of this week.

Extremely important is also a note that confirms that FED funds rate are still below their natural level and that the FED does not intend to use its balance sheet as the main tool for monetary policy in normal times. The key tool for monetary policy remains the interest rate decision.

Last, Chair Yellen pointed out multiple times that FED policies are not on a pre-set course and that the Central Banks might act accordingly if the inflation undershoots for longer than expected.