Yellen sees inflation coming down, but her forecast is far too conservative

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.

This article was written by Adam Button at Source