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The New Treasury-Fed Accord Takes Shape
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Yesterday’s Warsh speech successfully contained the rise in long-term Treasury yields
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4 itemsRobin J Brooks
The New Treasury-Fed Accord Takes Shape
ING THINK
Rates Spark: Warsh’s Fed takes inflation seriously
The desk underscores a bullish sentiment towards the sensitivity of the Federal Reserve towards inflation, as indicated by an uptick in the 10-year Treasury yield to around 4.45%. This rise stems from an increase in real yields, juxtaposed against a decline in breakeven inflation, reflecting a cautious but proactive stance by the Fed under Warsh's leadership. Per the full note from the bank research, this markedly shifts market expectations regarding future rate hikes. Consensus now hints at a potentially flatter yield curve, with the Fed signaling its readiness to combat inflation, even if rate hikes aren’t definitively on the horizon.
Robin J Brooks