That Fed rate decision was boring. I fought to keep my eyes open and my mind from wandering. It was the same old line about inflation and the Fed being determined to bring it back to target, with little action to back it up. After six years of above-target inflation, you would think the Fed would have a bit more urgency.
I’m glad, though, that financial conditions are supposedly tightening. Yes, the Chicago Fed’s National Financial Conditions Index has tightened so much that you can barely even see the change.
The 10-year Treasury yield crept higher today, up about 4 basis points. We’ll see where it goes from here, but the 10-year yield is very close to breaking out of its downtrend and resuming its upward climb. If the Fed continues moving at such a slow pace, the market may need to do more to tighten financial conditions on the Fed’s behalf. We can’t be certain, but that is one conclusion to draw from today’s non-event of a meeting. The Fed continues to leave the bond market to do its work.
Meanwhile, the 2-year Treasury yield remains in a bull flag pattern and has yet to break out. Tomorrow’s PCE and third-quarter GDP reports could provide that breakout.
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