Data from the Labor Department showed that consumer price index was flat in June after edging down by 0.1% in May.
"There was widespread price weakness in components stretching far beyond cell phone plans and prescription drugs", he said in a research note, pointing to the main factors Yellen has cited. EUR/USD was trading at 1.1434 from around 1.1418 ahead of the release of the data, GBP/USD was at 1.2992, compared to 1.2974 previously, while USD/JPY was at 112.50 from 113.05 earlier.
The Fed has a 2 per cent inflation target and tracks a measure which is now at 1.4 per cent. In her written testimony to congress, US Federal Reserve chairperson Janet Yellen subtly gave a nod to the possibility that these sluggish price pressures may be a product of more persistent, structural changes.
"I would like to see some greater evidence that we are making progress toward meeting our 2% inflation objective in the medium term", he said in an essay published on Thursday.
The consumer price index (CPI), which is often taken as a consensus measure of inflation by including all goods and services, came in unchanged during June, and is hovering around 1.6% year-on-year.
"I think there was a window of opportunity".
The food index was unchanged after five consecutive monthly increase. The core CPI, which excludes food and energy prices, fell to 1.7 percent from 2.2 percent over the same period and is forecast to hold steady.
Overall developments surrounding inflation will be a key factor in determining expectations surrounding Federal Reserve policy. For instance, governor Lael Brainard has signaled a willingness to get going on the balance sheet before seeing stronger price gains, but suggested she might be hesitant to move again on rates. The annual core inflation rate was 1.7 per cent, the same as May but six-tenths slower than January.
Dallas Fed President Robert Kaplan also adopted a cautious stance on recent slowdown in U.S inflation and called for a gradual removal of policy accommodation in future. Instead, the figures added to doubts about whether Fed policymakers will proceed with an additional rate hike in 2017. "We expect a little more cautious language from Fed officials on the inflation outlook going forward", said Michael Hanson, chief economist at TD Securities in NY. WTI crude traded 0.67% higher on Friday morning at $46.40/bbl, after falling as low as $42.50/bbl just three weeks ago.
If the number comes in low, the reasons why will matter.
But the view that age determines when boom turns to bust has come under question in an era of abnormally low interest rates and at a time when central bankers are struggling to combat anaemic readings of output, productivity and wage growth. "All that matters is inflation", he said.