Yields indicate the central bank won’t raise short-term rates above 2%, suggesting to some investors either economic weakness or market complacency. … the yield on the seven-year Treasury note has climbed this year from 0.643% to 1.353% as of Wednesday. But that is still very low, given investors now expect the Fed to raise rates in just six months or so. The implication from bond yields generally is that the Fed won’t ultimately lift rates higher than about 1.5% to 2%, according to analysts. By comparison, Fed officials have indicated they believe the fed-funds rate, the rate at which banks can lend excess reserves to each other overnight, will reach 2.5% over the longer run—the same as the so-called terminal rate reached in 2018 at the end of the central bank’s last cycle of rate increases.
Source: Wall Street Journal.
