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Treasuries pared earlier declines after a keenly watched figures on US inflation were largely in line with expectations, while the amount of Federal Reserve policy tightening priced in for next year slipped.

The move helped take the yield on the 2-year Treasury, a rate that’s sensitive to policy expectations back to around 0.69%, down from an intraday high of more than 0.72%. The benchmark 10-year rate was down marginally at around 1.49%. 

The prospect that inflation will be held in check may weigh against the need for the Federal Reserve to speed up the process of policy tightening as much as some had believed they might. Officials are due to deliver their next decision on Wednesday, and observers are watching for a potential acceleration in the pace of asset-purchase tapering, a precursor to eventual rate hikes by the central bank.

Swaps tied to Fed meetings indicate around 70 basis points of benchmark rate increases for 2022, down a few basis points from before the consumer-price data and shy of the 75 that would constitute three standard quarter-point increases.

“It was right in line with expectations and below some forecasts of more than 7%," said Kathy Jones, chief fixed-income strategist at Charles Schwab & Co. “It doesn’t change expectations about Fed policy and going forward inflation is likely to come down. So muted reaction."

The consumer price index increased 6.8% from November 2020, the fastest annual pace in nearly 40 years. It matched the median forecasts in a Bloomberg survey of economists. 

 

 

 

 

This story has been published from a wire agency feed without modifications to the text.

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