Yields climb as Fed dissenters speak out, US-Iran at standstill. Treasury yields rose across the curve today as the three Fed officials who dissented in favor of a rate hike warned of the risks of waiting too long to take policy action. Oil prices also rose as President Trump said that he’s “losing faith” in Iranian negotiators, which helped maintain upward pressure on yields. The 2-year yield closed 5 bps higher at 4.29% (down 4 bps on the week) and the 10-year yield closed 6 bps higher at 4.73% (up 6 bps on the week). Brent crude settled around $90 per barrel, up over 1.00% on the day. Meanwhile, equities were lifted by technology giants such as Amazon.com Inc., with the NASDAQ closing 1.00% higher.
Hammack, Kashkari, Logan voice inflation concerns. The dissenters from Wednesday’s FOMC meeting released separate statements today, with each expressing concern about inflation becoming entrenched in the US economy. Cleveland Fed President Beth Hammack said, “the longer that high inflation persists, the more challenging and costly it can be to bring it back down.” Minneapolis Fed President Neel Kashkari said he “would rather tighten policy incrementally,” while Dallas Fed President Lorie Logan added that “modest action in the near term would reduce the likelihood of…sharper action later.” US inflation levels have consistently remained above the Fed’s 2% target and the conflict in the Middle East has fueled energy-driven inflation concerns.
Consumer sentiment hits five-month high despite rising gas prices. The University of Michigan’s consumer sentiment index landed at 55.2 in July, up from 54.4 in June and above expectations of 54.0, marking the highest level in five months. The improvement occurred as one-year inflation expectations dropped despite renewed tensions in the Middle East and rising gas prices during the survey period. US gas prices currently stand at an average of $4.10 per gallon, according to AAA, compared to $3.86 during the prior survey window. Joanne Hsu, director of the UMich survey, explained that despite the improvement, there remains “a generally somber view of the economy amid five years of elevated inflation and persistent high prices.”
