The Fed hiked 25 basis points to 3.75% to 4.00%, yet the 10-year Treasury yield hit about 5.18% and the 2-year sits near 4.87%, pricing more tightening. Michigan sentiment fell to 48.1 while long-run inflation expectations rose to 3.4%.
Chair Kevin Warsh’s first hike since 2023 was unanimous, even as colleagues slow his push to shrink the Fed’s $6.7 trillion balance sheet. Source
The Fed's 25 basis point hike to 3.75% to 4.00% was its first since 2023, and Chair Kevin Warsh carried a unanimous 12-0 vote. It is no longer the story. The bond market moved further than the Fed did. The 10-year Treasury yield reached about 5.18%, above the roughly 5.0% peak of October 2023. The 2-year sat near 4.87%, about 87 basis points above the top of the new funds range, per the Fed's H.15 release. A policy rate that far below the front end of the curve only makes sense if markets expect the Fed to keep going.
