Inflation, The Fire Under The Ashes
Disagreements between the FOMC members, lifting the market's risk sentiment. And now, the U.S. bond yields are divergent, as Fed officials differ.
After last week's Fed's FOMC meeting, 10-year bond yields fell to the June 10 low, while short-term interest rates (2-year bond yields) rose to 0.25%, the highest since April 2021. However, it may also mean that behind the flattening curve may also see the market concerns about long-term economic growth.
There are two different scenarios, and both have their fans. Some analysts were highlighting that as long as prices are rising, tightening policies from FED is getting more attention and will be more expected. On the other hand, we have theorists who believe that the current rebound may not be the beginning of a new cycle. They also say that in the long run, the Fed may repeat the history of mid-to-late 2010— and the Central Bank will restart a new round of easing cycles when it can't withdraw.
On teh other hand, St. Louis Fed Chairman Bullard and Kaplan, in their latest speeches, eased their Hawkish tone; however, Bullard- told that "If necessary, consider raising interest rates before the end of the reduction," and Kaplan said that demand has rebounded and supports the Fed's early withdrawal of asset purchases plan. Also, FED Chairman, Mr. Powell maintained a more neutral stance by saying that the upward trend of inflation may fade and eventually return to the target level, but the pace of employment recovery is still inconsistent; "the new variant of the virus is still one of the risks";
While later today, we are waiting for Fed Chair Jerome Powells' testimony before the House Select Subcommittee on the Coronavirus Crisis; once more, he mentioned that despite the latest rise, inflation should decrease towards the Central Bank's 2% target, and the market will balance the demand snd supply.
So far today, Nikkie could regain all yesterday's losses and gain over 3.12%, and Shanghai closed +0.80%, and Hang Seng closed 0.63% lower. In Europe, despite the 0.2% gain of GB100, other indices are losing, not less than 0.2%. In the U.S. futures market, the S&P 500 Index (SP500) and Dow Jones (DJI) losing around 0.1%, while Nasdaq (Nd100) trading 0.3% lower.
