This is an extremely conservative forecast from Yellen.
The January and February US CPI prints were +0.5% and +0.4% m/m, respectively. Those will be lapped in a few months and CPI inflation is currently running at 3.1% y/y. A fall to a 2-handle is almost a sure thing and given the declines in oil an gas prices, I one-handle isn't out of the question.
I think a big reason that markets are pricing in such a dovish scenario from the Fed is that there's a decent chance of some very low headline CPI readings next year.
Other comments:
- There's no reason for investors to feel nervous about issuance of Treasuries
- Says she's very happy with outcomes we've seen with the economy
- There are risks on the horizon, but doesn't see risk of recession as particularly high
- Rental costs have stopped going up
- Turbulence in job market has really settled own, no significant uptick in layoffs
Otherwise, this interview has been a major victory lap for Yellen, as she tries to get the White House to take credit for a soft landing that hasn't happened yet. She's also trying to spin a victory for team transitory, which is laughable.
