Federal Reserve Bank of Richmond President Thomas Barkin said surging US Treasury yields reflect strong economic data as well as heavy supply, adding that it’s a return to a more normal rate seen in prior years.
(Bloomberg) — Federal Reserve Bank of Richmond President Thomas Barkin said surging US Treasury yields reflect strong economic data as well as heavy supply, adding that it’s a return to a more normal rate seen in prior years.
“There’s a lot of fiscal issuance out there,” Barkin said Thursday at an event hosted by the University of North Carolina Wilmington. “That’s creating a lot of supply. And the data have come in a lot stronger lately.”
Longer-dated Treasury yields surged this week as investors braced for higher interest rates for longer, especially after a report Tuesday showed US job openings jumped by more than forecast. Ten- and 30-year yields came down a bit after a report Wednesday showed weaker-than-expected private payrolls, but they’re still near the highest levels since the global financial crisis.
Read more: Fed Puts Soft Landing at Risk by Accepting Bond Yield Surge
San Francisco Fed President Mary Daly said in separate remarks Thursday that if financial conditions remain tight, the central bank may not need to do as much to tame inflation.
Fed officials left their benchmark lending rate unchanged last month in a range of 5.25% to 5.5% — a 22-year high — while their latest quarterly forecasts showed most expect one more rate increase this year. The projections also showed policymakers anticipate rates will need to stay higher for longer than they expected just a few months ago to bring inflation back to their 2% target.
Barkin, who does not vote on rate decisions this year, repeated his view that policymakers have time to determine if they need to do more work to cool inflation, and it was too early to know if another rate increase would be needed this year.
“We have time to see if we’ve done enough or whether there’s more work to do,” he said. “The path forward depends on whether we can convince ourselves inflationary pressures are behind us or whether we see them persistent. And I’ll be watching the labor market closely for those signals.”
Barkin said he sees a “narrow path” to a soft landing for the economy, avoiding a recession.
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