NewzNEW YORK (AP) — The bond market swung Friday as investors built bets that the Federal Reserve may hike interest rates soon to get the nation’s high inflation under control. stocks, meanwhile, dipped but not by much after economists said a speech by Chairman Kevin Warsh helped strengthen faith that the Fed will do what’s needed to bring inflation down, even if it causes pain for the economy in the short term.The S&P 500 fell 0.2% after flipping between modest gains and losses through the morning. The Dow Jones Industrial Average dipped 9 points, or less than 0.1%, and the Nasdaq composite slipped 0.5%.The reaction was stronger in the bond market following Warsh’s first speech as chairman of the Fed at an annual economic symposium held in Jackson Hole, Wyoming.
The mountain setting has been the backdrop for major Fed policy announcements in the past, and the pressure was on Warsh.Worries had grown that his tough talk about getting inflation down to the Fed’s 2% target may be just that, unless the Fed backs it up with action. The Fed could hike short-term interest rates to get inflation under control, but it could also feel deterred from doing so because that would slow the economy and hurt prices for investments. And President Donald Trump, who appointed Warsh, has been vocal about wanting interest rates to be lower rather than higher.Warsh was adamant again on Friday that he wants to give financial markets fewer clues about what the Fed plans to do with rates for its two jobs of keeping inflation low and the job market strong.
He has said he wants markets to react to what incoming data says about the economy and inflation rather than what the Fed says.But Warsh also said Friday that “short-term interest rates are the predominant tool” for the Fed to do its job. And he said, “I would be hard pressed to describe broad financial conditions as restrictive,” an implication that short-term interest rates may not be high enough to tamp down the economy and inflation.The yield on the two-year Treasury, which closely tracks expectations for what the Fed will do with its federal funds rate, jumped to 4.35% from 4.22% just before the speech.That’s a big move for the bond market, and it was because traders upped their forecasts that the Fed will hike its federal funds rate as soon as next month. They’re now betting on a nearly 58% probability of that, up from the 3…
NEW YORK (AP) — The bond market swung as investors built bets that the Federal Reserve may hike interest rates soon to get the nation’s high inflation under control. stocks, meanwhile, dipped Friday but not by much after economists said a speech by Chairman Kevin Warsh helped strengthen faith that the Fed will do what’s needed to bring inflation down, even if it causes pain for the economy in the short term. The S&P 500 fell 0.3% after flipping between modest gains and losses through the morning.
The Dow Jones Industrial Average dipped less than 0.1%, and the Nasdaq composite fell 0.5%.THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.NEW YORK (AP) — The bond market shook Friday under a flurry of moves by investors anticipating the Federal Reserve may hike interest rates soon to get the nation’s high inflation under control. The Dow Jones Industrial Average was down 30 points, or 0.1%, with an hour of trading remaining, and the Nasdaq composite was 0.6% lower.The reaction was stronger in the bond market following Warsh's first speech as chairman of the Fed at an annual economic symposium held in Jackson Hole, Wyoming.
Summary from source