THE BOYS' BRIGADE

From Jon Hilsenrath and Kate Davidson at the WSJ: Fed’s Yellen Aims to Move Rates Up Soon, but on a Slow Path

Fed officials have indicated they could move rates as early as September, though many investors expect the Fed to wait until December. Ms. Yellen, testifying Wednesday before a House panel, avoided being pinned down on a date, but did yield some insight into her tactical thinking on the timing.

She was more inclined to move rates up soon and proceed slowly than to wait a long time and move aggressively to catch up if the Fed finds itself behind the curve in preventing the economy or markets from overheating, she told the House Financial Services Committee. Moving soon and slowly, she said, could give the central bank flexibility as it proceeds.

Goldman Sachs economist Kris Dawsey thinks the Fed will move in December:

Comments from Fed officials since the June meeting—including Chair Yellen's monetary policy testimony today—appear consistent with our forecast for a December rate hike. However, Fed officials are by no means "ruling out" September.
...
On balance, we believe that recent Fedspeak has been broadly consistent with our expectation for a hike in December. That said, many Fed officials themselves do not appear to have high conviction views about September vs. December at this time. Amongst two hikers, Williams said he was in "wait-and-see mode" and Powell indicated that the odds of September vs. later were "roughly 50/50." Meanwhile, amongst those we expect would be one-hikers, the possibility of a September hike seems very much alive. Overall, we think that risk management considerations, continued concern about global developments, a prudent desire for the first hike after seven years of zero interest rates to be almost fully anticipated by the market, and persistently subdued realizations on core inflation will ultimately carry the day and result in a December hike.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 282 thousand from 297 thousand.

• At 10:00 AM, the Philly Fed manufacturing survey for July. The consensus is for a reading of 11.5, down from 15.2 last month (above zero indicates expansion).

• Also at 10:00 AM, the July NAHB homebuilder survey. The consensus is for a reading of 59, unchanged from 59 last month. Any number above 50 indicates that more builders view sales conditions as good than poor.

• Also at 10:00 AM, Testimony by Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate