This afternoon’s sharp downward move in yields for the shorter maturity US government securities (see for example the 2-year chart below) is consistent with what I had cautioned in recent weeks was an excessive market pricing of #Fed rate hikes.
Importantly, however, …
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Importantly, however, …
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… this is not because such hikes are not needed to tame #inflation quickly consistent with the Fed’s 2% target. They would be if the starting point was not so problematic.
One big issue is that the #FederalReserve is already very late in responding.
As such, the Fed’s …
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One big issue is that the #FederalReserve is already very late in responding.
As such, the Fed’s …
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… potential non-validation of the prior forward curve would be linked more to the potential adverse impact on growth … making today’s equity market reaction too exuberant if this analysis is indeed correct, and also making the #growth and #inflation outlook far from linear.
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