Despite today’s very low inflation the Fed keeps raising interest rates and is now discussing when to shrink its balance sheet to further tighten monetary policy. The Fed’s own inflation forecast anticipates continued low inflation at 1.6% in 2017 creeping up to 2% in 2018 and 2019 and not seeing any increase later on. Moreover,…
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The minutes of the Fed’s April 26-7 meeting convinced almost everyone that the Fed will raise interest rates at its next meeting in June, but left them wondering why. Most of the subsequent discussion centered on the labor market and how close the economy is to full employment. There was also some whispering about inflation….
Food price inflation is increasing sharply in the US. Only last December 2013, food prices were just 1.05% higher than the previous December. As of May 2014, food price inflation was running at 2.46% (year over year) and possibly heading above 4% by late 2014 or early 2015. Now, the Federal Reserve (Fed) prefers to…
After starting last week at a yield of 2.52%, the yield of the S&P/BGCantor Current 10 Year U.S. Treasury Bond Index climbed to a high of 2.72% to close the index before the July 4th holiday. The 6.1% unemployment number moved yields higher as the markets were expecting an unchanged result from the prior level…
The S&P GSCI Gold lost 3.9% in May and has hit its lowest index level since January. This questions whether gold can recover after its biggest historical drop since 1981. According to the Federal Reserve, the U.S. economy is strengthening, labor market conditions are improving and inflation has been low in the expanding economy. According to…
The month of May closed on a high note for bonds as the drop in yields saw the S&P/BGCantor Current 10 Year U.S. Treasury Index closed at a yield of 2.47%. Treasuries as measured by the S&P/BGCantor U.S. Treasury Bond Index returned 0.7% for the month and 2.12% year-to-date. As of today, the yield on…
Over the course of last week, yields on all on-the-run bonds moved lower. The yield on the S&P/BGCantor Current 10 Year U.S. Treasury Index closed Friday 11 basis points lower at a 2.67%. During the week the Treasury did auction $32 billion 2’s, $35 billion 5’s and $29 billion 7-year notes. Though the 2-year auction…
The charts show the twin concerns of the Fed: inflation and unemployment. Despite fears that easy money would send inflation surging, it is quietly fading away. The real worry is unemployment. While declining, at 7% recently it remains above any estimate of full employment. Low inflation and low unemployment can be in conflict with one-another. …
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