Overall this was mostly a non-event, although on an otherwise slow news day, the press did try to spin some of her comments as mildly cautious on the economy. (However, the market didn’t really see it that way, evidenced by a stronger stock market and dollar, and weaker bonds and gold.).
In particular, Chair Yellen referred to GDP growth as being “somewhat” higher in ’14 than ’13, and it was the “somewhat” comment that commentators keyed off of, as it was viewed as a slight downgrade.
Additionally, although she said she did not think the stock market was in a bubble, she did cite overvaluation in some small caps. Finally, she did reference some caution on the housing market, that the recovery might not resume as quickly as anticipated given rising prices.
But, extrapolating those comments out to be cautious on the economy—one week after the FOMC statement was upbeat on the economy—is a stretch. The bottom line with Chair Yellen’s testimony is that the outlook for Fed policy and the economy remains unchanged (continued QE tapering that ends in October/December of this year, first rate hike mid-2015, and 3% annual GDP growth, respectively).