Daily Market Color

Inflation Remains in Focus as Infrastructure Bill Signed, Former Fed Officials Sound Off

Rates rise once again as former Fed officials sound off on inflation. Former Fed officials William Dudley and Jeff Lacker both said they expect the Fed to raise rates above 3% to combat inflation- making the comments in separate interviews with Bloomberg News. William Dudley, formerly head of the NY Fed, acknowledged that the Fed still believes that current price pressures are “transitory” and that the central bank is unlikely to accelerate the pace of its taper program, setting the stage for a rate hike in mid-2022 at the earliest. Swap rates and Treasury yields rose across the curve, the 10-year yield climbing 5 bps to close above 1.60%- a full 20bps above its closing level on the eve of last week’s CPI print.

President Biden signs $1.2T infrastructure bill into law. The bill, a bipartisan spending package, includes $550B of new spending on roads, bridges, tunnels and other infrastructure. Its passing sets the stage for a more contentious debate on President Biden’s marquee piece of legislation, a $1.75T social spending bill. Later this week, the Congressional Budget Office will release its report on the social spending bill, a report which Democratic Senator Joe Manchin has said is necessary before Congress can assess the potential inflation impact of the legislation.

Retail sales data due. Tomorrow, the market will get the latest look at Retail Sales data for the month of October. Forecasts call for headline sales to grow by 1.5%, up from a more tepid 0.7% increase in the month of September. Import Prices and Industrial Production figures will also be released.

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