Wednesday: New Home Sales, Yellen

The following paragraph from Fed Chair Janet Yellen's testimony today seems to suggest "patient" will be dropped from the FOMC statement at the March 17-18 meeting. Sentence by sentence:

The FOMC's assessment that it can be patient in beginning to normalize policy means that the Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings.

That just repeated the current understanding. If the FOMC wants to have the option to raise rates in June, they would most likely drop "patient" from the statement in March (June is the second meeting after March).

If economic conditions continue to improve, as the Committee anticipates, the Committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis. Before then, the Committee will change its forward guidance.

Yes, the FOMC needs to drop "patient" before they move to a meeting-by-meeting basis.

However, it is important to emphasize that a modification of the forward guidance should not be read as indicating that the Committee will necessarily increase the target range in a couple of meetings.

This was the clarification today. Although "patient" probably means no hike for at least two meetings, dropping "patient" does not mean a rate hike is guaranteed two meetings later - just that a hike may be considered based on incoming data (employment and inflation).

Right now I expect the FOMC to drop patient at the next meeting.

Wednesday:
• At 7:00 AM ET, Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 10:00 AM, New Home Sales for January from the Census Bureau. The consensus is for a decrease in sales to 471 thousand Seasonally Adjusted Annual Rate (SAAR) in January from 481 thousand in December.

• Also at 10:00 AM, Testimony, Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the House Financial Services Committee, Washington, D.C. (Report will be a repeat, plus Q&A).