FILE - Federal Reserve Chairman Jerome Powell speaks at a meeting of the Economic Club of New York, Oct. 19, 2023, in New York. The Federal Reserve is expected to leave interest rates alone when its latest meeting ends Wednesday. But economists will be listening closely to what Chair Jerome Powell says about the possible future path for rates.
Though the Fed has raised its benchmark rate to a 22-year high, it hasn’t imposed any hikes since July. Even so, the yield — or interest rate — on the 10-year Treasury note has kept rising, hitting 5% last week, a level it hadn’t reached in 16 years. The surge in Treasury yields has caused the average 30-year fixed mortgage rate to reach nearly 8% and has also raised the costs of credit cards, auto loans and many forms of business borrowing.
What’s important for the Fed is that the yield on the 10-year Treasury has continued to zoom higher even without rate hikes by the central bank. That suggests that Treasury yields may stay unusually high even if the Fed keeps its own benchmark rate on hold. Many business and consumer loan rates might, in turn, also stay high, helping keep a lid on economic growth and inflation.
“The story of the year so far,” economists at Goldman Sachs wrote, “has been that economic reacceleration has not prevented further ... progress in the inflation fight.”
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