FOMC Interest Rate Preview: Can the Fed Calm Surging Bond Yields?
The Federal Open Market Committee (FOMC) will hold its closely watched meeting on September 15 and 16. This comes as US bond yields continue their relentless rally, with investors growing increasingly concerned about soaring government spending. So, will the Fed manage to calm the bond market? FOMC Preview as Investors Predict a Rate Hike Most investors believe that the Federal Reserve will hike interest rates after the recent macro numbers. The closely watched CME FedWatch tool places the odds of a hike at 87%. Similarly, Polymarket places the odds of a hike happening in this meeting at 80%. A report released earlier this month showed that the economy added over 162k jobs in August, three times what analysts were expecting. The Bureau of Labor Statistics (BLS) also revised the July jobs numbers from minus 23,000 to over 20,000. These numbers suggest that the labor market is stronger than initially expected. Read Also: Salesforce Stock Has Surged as AI and Anthropic Bets Pay Off, But Technical Risks Remain This week’s US inflation numbers suggested that consumer prices remains at an elevated level. The headline Consumer Price Index (CPI) rose 3.4% on an annual basis, while the core
The Federal Open Market Committee (FOMC) will hold its closely watched meeting on September 15 and 16. This comes as US bond yields continue their relentless rally, with investors growing increasingly concerned about soaring government spending. So, will the Fed manage to calm the bond market? FOMC Preview as Investors Predict a Rate Hike Most investors believe that the Federal Reserve will hike interest rates after the recent macro numbers.
The closely watched CME FedWatch tool places the odds of a hike at 87%. Similarly, Polymarket places the odds of a hike happening in this meeting at 80%. A report released earlier this month showed that the economy added over 162k jobs in August, three times what analysts were expecting. The Bureau of Labor Statistics (BLS) also revised the July jobs numbers from minus 23,000 to over 20,000.
These numbers suggest that the labor market is stronger than initially expected. Read Also: Salesforce Stock Has Surged as AI and Anthropic Bets Pay Off, But Technical Risks Remain This week’s US inflation numbers suggested that consumer prices remains at an elevated level. 4%. 3%.
US inflation will likely continue rising as the US-Iran war escalates. President Donald Trump has said that he expects the war to end after the election. The crisis escalated as Ansar Allah took key positions at the Bab el-Mandeb Strait. As a result, crude oil prices have continued rising, with Brent and the West Texas Intermediate (WTI) remaining above $100.
US Bond Yields Have Soared The Fed decision comes as US bond yields remain at the highest level in years. 96% and is about to cross the important resistance level of 5%. It has soared to the highest level since October 2023. 36%.
Soaring bond yields mean that their prices are falling since they have an inverse relationship. US 10-year and 30-year yields | Source: TradingView The US bond yields are rising because of the rising signs that the economy is slowing and elevated public debt. 2 trillion level. Therefore, analysts argue that the Fed should hike interest rates in this meeting, which will solidify its independence from the executive.
5% and 1%. Still, even a rate hike will likely not calm the bond market. Instead, yields will likely retreat if Congress and the Trump administration come up with a strategy to reduce the budget deficit. Read Also: Joby and Archer Aviation Are Falling Just as Air Taxis Near Reality Image: Shutterstock