Having told a Congressional Hearing earlier this month that the US Fed would gradually raise rates as a sign of confidence in the US economy Fed Chair Janet Yellen testified to the same effect at the Senate the following day with an interesting caveat.

What stood out as most interesting was her somewhat less confident statements about the direction of interest rates. When asked about the possibility of negative interest rates in the US the Fed Chair responded "We had previously (2010) considered them and decided that they would not work well" but then added "In light of the experience of European countries and others that have gone to negative rates we're taking a look at them again because we would want to be prepared in the event that we needed to add accommodation"

Negative rates are seen as a sign that a country's economy is weakening and so given that the Fed have just raised rates in December 2015 this would be an admission that the economy was not recovering at all. Furthermore St. Louis Fed president James Bullard this week stated it is unwise for the Fed to continue with planned rate hikes.

Some analysts interpret these statements as the Fed's attempt to appease tumultuous markets who fear the end of cheap speculative money. It is usually the Fed's words that effect the markets but for now at least, it seems the tail is wagging the dog.