The US Federal Reserve is sharpening its hawkish stance on monetary tightening, with attention focused on whether it will go ahead with another rate hike at next month's policy meeting. At last week's Federal Open Market Committee meeting, the Fed decided on its first rate increase in about three years and signaled one more hike before the end of the year. Chair Warsh struck a cautious note on stubborn inflation at last week's press conference, saying the underlying trend has not improved much, while Governor Barr said in a speech on the 23rd that further policy adjustment is likely to be needed. Chicago Fed President Goolsbee also signaled openness to tightening more aggressively and sooner. In financial markets on the 23rd, solid economic data combined with expectations of an early rate hike accelerated bond selling, briefly pushing the 10-year US Treasury yield, a benchmark for long-term rates, into the 5.13 percent range, its highest in about 19 years, before ending the session at 5.12 percent, up 0.16 percentage point from the previous day. With President Trump, eyeing November's midterm elections and hoping to boost the economy, stepping up pressure for rate cuts, some see an October hike as difficult, but with no end in sight to the US-Iran conflict and oil prices staying high, inflationary pressure looks unlikely to ease.
Fed sharpens hawkish stance with first hike in three years and signals another, pushing the effective funds rate higher.
Hawkish Fed and solid data accelerated bond selling, briefly pushing the 10-year Treasury yield to ~5.13%, its highest in about 19 years.
