The central focus for today is probably still going to be Fed Chair Yellen testifying to Congress, once again.
Yesterday’s testimony confirmed this year’s other rate hike and quantitative policy tightening process that the market expected, but the discussions about the longer-term neutral rate of Fed funds and caution on the inflation outlook gave investors a reason to be cheerful.
There is, perhaps, some confirmation bias to this.
Fed Chair Yellen’s comments were very measured, but markets wanted to see what they wanted to see these days.
The market reaction was not that excessive, so it seems unlikely that there will any attempt to alter the perception with today’s remarks.
Meanwhile, yesterday, the Bank of Canada has joined the tightening party by rising for the first time in seven years its key benchmark interest rate to 0.75 percent from 0.5 percent.
The necessity of abnormally low rates in a normal