The Federal Open Market Committee left its benchmark rate at 3.5% to 3.75%, and long-dated Treasury yields climbed on the decision. The 30-year bond yield touched 5.244%, its highest level since July 2007, while three committee members dissented in favor of a quarter-point hike.
The 30-year Treasury bond yield jumped 10.5 basis points to 5.201% on Wednesday and reached 5.244% during the session, its highest level since July 2007. Traders pushed longer-dated yields higher as they weighed whether the Federal Reserve can keep inflation at bay after its latest monetary policy decision.
Yields on the benchmark 10-year note climbed nearly 7 basis points to 4.671%. Shorter-dated Treasurys rose, pushing their yields lower, with the 2-year trading 4 basis points lower at 4.236%.
Three dissents behind the hold
The rate-setting committee left rates unchanged in the range of 3.5% to 3.75%, but three policy members dissented in favor of raising rates by a quarter percentage point. Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said market pricing for a hike has likely simply been pushed forward.
Ian Lyngen, BMO's head of U.S. rates, wrote in a note that the committee has vocal hawks but that the majority is siding with Chairman Kevin Warsh to keep rates stable until at least September, when policymakers will have the July and August CPI reports.
Inflation data decides September
Warsh took over a Fed that has seen inflation exceed its 2% target since 2021. The consumer price index then posted an unexpected decline last month, bringing the annual inflation rate down to 3.5% in June. But in the weeks that followed, oil prices jumped again amid the escalating conflict in the Middle East.
The chairman stressed that the committee will be quick to act if inflation pressures accelerate. According to CNBC, he said in a press conference: "where necessary and appropriate, we will not hesitate to act."
Oil supplies the next test
Energy prices spiked Wednesday after President Donald Trump told a Fox News reporter that the U.S. would hit Iran hard in response to the surprise attacks. West Texas Intermediate crude futures advanced 6.6% to settle at $84.46 a barrel.
Iran targeted American forces in the Middle East with ballistic missiles, U.S. Central Command said late Tuesday. Centcom said in a post on X that the attack originated from Iran but that all missiles were intercepted.
Source: CNBC International
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