Yellen’s long-awaited speech delivered little in the way of surprises, but she did say that ‘the case for an increase in the federal funds rate has strengthened in recent months.’

Still, consistent with previous statements, she reiterated that the outlook remained uncertain and that Federal Reserve policy is not on a preset course.

The bulk of her speech outlined the Fed’s current toolkit, which includes rate cuts, asset purchases (quantitative easing) and forward guidance; but also said that other tools such as inflation targeting and GDP targeting may be necessary in the future.

Following her speech, Vice Chair Stanley Fischer went on CNBC and said that her comments were consistent with a possible September rate hike, but also said that the Fed was data dependent.

As a result of their combined comments, the market now put the odds of a September rate hike at 36 percent, from 21 percent previously.  A December hike had been at 51.8 percent and jumped to 59.1 percent afterwards.

I happen to believe that the odds of a September hike are higher on the basis that the Fed may want to raise twice this year.  If they only raise once in December, we’ll keep hearing that the current pace of hikes won’t get us back to ‘normal’ for a decade.