Fed Chair Janet Yellen gave her semi-annual report on monetary policy to the Senate today. Its content is consistent with our interpretations of both monetary policy and the labor market. The key phrase from our standpoint is:

“we currently anticipate that even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the federal funds rate below levels that the Committee views as normal in the longer run

We interpret this to mean a delayed and slow increase in short term rates, starting perhaps in the second quarter of 2015.