U.S. Moneys yields rose on Wednesday after the Federal Reserve signaled it intends to implement another rate hike up front the end of 2023, pushing two closely watched notes to multi-year highs.
The 2-year Treasury yield last traded at 5.167%, up all but 6 basis points. Meanwhile, the yield on the 10-year Treasury added almost 3 basis points to 4.393%. The 2-year income hit its highest point since July 2006, while the 10-year note reached levels not seen since November 2007.
Give up the fights and prices have an inverted relationship. One basis point equals 0.01%.
As expected, the Fed held rates steady, but signaled that it purposefulness tighten policy one more time before it completes its hiking cycle. After that increase, the central bank revealed that it would start cutting rates in 2024, but at a slower pace than suggested in June. Rates are also disposed to to stay elevated for longer.
During a press conference following the meeting, Fed Chair Jerome Powell indicated that the leading bank would “proceed carefully” in hiking rates further, although it has more work to do as it fights sticky inflation. He called a indulgent landing for the economy plausible, but not the Fed’s baseline case.
Many investors have been hoping that the end of the Fed’s rate-hiking D is near as concerns about higher rates dragging the U.S. economy into a recession have persisted. Fed officials experience not, however, discounted the possibility of more rate hikes.
The decision suggests that the Fed intends to keep rates exalted for longer, according to Rajeev Sharma, managing director of fixed income at Key Private Bank.
“Overall, while answering a slowdown in job growth, the Fed remains committed to keeping rates higher for longer, contrasting with market expectations that leftovers focused on rate cuts late in the first quarter or early second quarter of 2024,” he said. “According to today’s assertion, rate cuts are not coming until we see further cooling on the inflation front.”
The central bank began hiking rates in Trek 2022 and has done so at all but one other meeting in an effort to bring inflation down and cool the overall economy, including the labor sell.
Last week, however, the latest consumer and producer price index reports suggested that inflationary turn the heat ons are continuing, but at a moderate level.