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It is not unreasonable to imagine the Fed embarking on a rate hike cycle in 3-4 years

The Bank of America (BofA) recently highlighted the probabilities of a Fed rate hike in the next 3 or so years, or even sooner, considering the 10-year bond yields and the economic transition.

The US bank quotes Fed Chairman Jerome Powell, although he initially defied rate hike probabilities before saying, “the market is thinking about it, and we are starting to see the dynamics come back into play pushing rates to 10 years up “.

“While it seems almost crazy to imagine the Fed raising rates, the fact is that the 10-year rates incorporate the Fed’s policy expectations for the entire period of the next 10 years, and it is not unreasonable to imagine that the Fed will embark on a bullish cycle in 3-4 years, or even sooner if all goes well with the pandemic and the economy”Says the report.

It’s worth mentioning that 10-year US Treasury yields fell 1.7 basis points to 0.85% at the close of Wednesday. Yields declined after updating the eight-month high the prior week.

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