Real Rates Flash Need for Greater Urgency From Powell and Fed
- Inflation-adjusted yields are below the peaks seen this year
- Markets seem skeptical of Fed’s ability to manage soft landing
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The Federal Reserve’s latest dot plot pencils in seven rate increases this year, more than double the number the monetary authority in December envisaged would be needed to tame inflation. We have seen a procession of Fed speakers, including the more dovish members, concede that they need to get on with it sooner rather than later.
And what we did get from the markets? Nominal yields have reacted vigorously and with conviction. But for the real reaction, take a look at real rates. In the week since the Fed met, the five-year yield has been mostly lower and a whole lot lower than this year’s peak. The 10-year tells a similar story.