Yellen's Testimony and the January PPI -- Implications for March Rate HIke?

Yellen, in her Semi-Annual Monetary Policy Testimony, appeared to raise the risk of a Fed rate hike at the March 14-15 FOMC Meeting, as her emphasis on the inflationary consequence of waiting too long to tighten was not in the last FOMC Statement. To be sure, this emphasis could have been just a throw-away comment, as it is the standard Fed line.  It may have been made more to justify the Fed's expectations to hike rates this year than to point specifically to a March hike.

The minutes of the January 31-February 1 FOMC Meeting could shed light on the significance of her comment.  The fact that the risk of waiting too long to hike did not appear in the Statement suggests the minutes will indicate that any such thought was just the standard background view of monetary policy.  Nevertheless, a strong February Employment Report, due March 10, could be used as an excuse to tighten -- if the Fed wants to hike. 

Today's high print of the January PPI (+0.6% m/m Total, +0.4% Core) does not suggest that a pickup in inflation will trigger a March rate hike.  The high print resulted from a jump in a component -- trade services prices -- that is volatile and somewhat suspect in its relevance regarding inflation.  Excluding Trade Services, the Core PPI rose only 0.2% m/m, in line with the 0.1-0.2% range seen in 8 of 12 months of 2016.