Tag: bond market

Janet Yellen’s equivocal remarks at last week’s semi-annual Congressional testimony certainly might make you believe that a rate hike at the Federal Reserve’s July 25-26 meeting is hardly a sure thing. Indeed, the odds of that happening are a lot less than 50-50. A lot less.

In her testimony, Yellen remained confident in her previous declarations that inflation would gradually rise to the Fed’s 2% target. “It’s premature to reach the judgment that we’re not on the path to 2% inflation over the next couple of years,” she said. But then she quickly hedged her bets. “We’re watching this very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent,” she said.

Based on the past several months’ worth of inflation statistics, one would have a tough time arguing that lower-than-expected inflation hasn’t become “persistent.” Last month’s consumer price index was unchanged from May and up only 1.6% versus a year earlier, the fourth straight decline by that measurement. That followed May’s personal-consumption expenditures index, the Fed’s preferred inflation measure, which fell 0.1%. The core index, which excludes food and energy, rose 0.1%, but just 1.4% on a year-to-year basis, well below the Fed’s target rate and lower than at the beginning of the year. Continue reading "Has Yellen Become A Dove Again?" →

The bond market may have stopped listening to the Federal Reserve, but that doesn't mean we shouldn't know what the voting members of its monetary policy committee are thinking. What's clear is that they're not as united as they were at their last meeting just two weeks ago, when they voted nearly unanimously to raise interest rates by 25 basis points, with only Minneapolis Fed President Neel Kashkari voting against.

Now, no sooner was the vote cast, but it appears that it at least one member, maybe two, have misgivings about voting for the increase. At the very least, they're not as much in a hurry to raise rates again soon, if not until the end of this year, if not even later.

Still, as you would expect – or hope for – in a body of intelligent people, there's a strong difference of opinion on what the Fed should do next as it concerns interest rates. Continue reading "Should We Believe The 'Transitory' Story?" →