Federal Reserve Chair Janet Yellen is set to offer testimony in front of the Committee on Financial Services of the U.S. House of Representatives on Wednesday. This used to be Humphrey-Hawkins testimony, and it is effectively the first real peep we will have heard from the Yellen in over 50 days. What seems to have happened here is that she has toned down the rhetoric of the endless desire to hike interest rates, but she has of course left many outs on that front. That being said, the term “data dependent” was not actually said once, even if it was talked around.

The first conditions noted were that the economy has made further progress toward the Fed’s objective of maximum employment, and while inflation is expected to remain low in the near term, the Federal Open Market Committee (FOMC) expects that inflation will rise to its 2% objective over the medium term.

Despite massive improvements in the labor force, some slack in labor markets remains, and there is still room for further sustainable improvement.

One area of concern is that growth in the gross domestic product was first reported as only 0.75% or so in the fourth quarter. Yellen showed that final demand appears to have slowed even though household spending has been supported by steady job gains and solid growth in real disposable income. She did note that the disposable income rise has been aided in part by the declines in oil prices.

Here is where Yellen’s prepared remarks of her testimony will get an eye for not being so aggressive on hiking interest rates. She said:

Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar. These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market, although declines in longer-term interest rates and oil prices provide some offset.

Yellen counterbalanced some of those risks:

Still, ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer spending, and global economic growth should pick up over time, supported by highly accommodative monetary policies abroad. Against this backdrop, the Committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labor market indicators will continue to strengthen.

Yellen also noted that the economic outlook is uncertain. She admitted that foreign economic developments pose risks here. Still, she does address China and lower commodity and energy prices:

Recent economic indicators do not suggest a sharp slowdown in Chinese growth — declines in the foreign exchange value of the renminbi have intensified uncertainty about China’s exchange rate policy and the prospects for its economy. This uncertainty led to increased volatility in global financial markets and, against the background of persistent weakness abroad, exacerbated concerns about the outlook for global growth. These growth concerns, along with strong supply conditions and high inventories, contributed to the recent fall in the prices of oil and other commodities. In turn, low commodity prices could trigger financial stresses in commodity-exporting economies, particularly in vulnerable emerging market economies, and for commodity-producing firms in many countries. Should any of these downside risks materialize, foreign activity and demand for U.S. exports could weaken and financial market conditions could tighten further.

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