Posted on 07/30/2025 5:05:27 PM PDT by E. Pluribus Unum
When the Fed cut short rates in the fall, long-bond yields spiked.
The Federal Open Market Committee meets this week to discuss monetary policy, and President Trump is demanding a big cut in the Fed’s target short-term rate. That’s what Mr. Trump always wants. But is he looking at the wrong interest rate?
The Fed isn’t expected to cut its current short-term target rate of 4.25%-4.5% this week, and no doubt that will upset the President. But if Chair Jerome Powell is cautious, perhaps it’s born of experience. When the Fed began a rate-cutting spree last September, it was premature and a mistake that financial markets punished.
The nearby chart comparing short- and long-term interest movements tells the tale. Ideally when the Fed cuts its short-term target rate, the entire interest-rate yield curve will fall along with it. That’s critical because the rates that matter most to the economy are longer rates, especially the 10-year Treasury. Those are rates that most affect corporate borrowing and consumer mortgages.
But look at what happened when the Fed cut its target rate three times by a total of 100 basis points from September to December. The 10-year yield popped instead of falling with the short-term cuts.
On Sept. 16 the 10-year Treasury note stood at 3.62%. The FOMC announced its 50-basis-point cut on Sept. 18, and the 10-year began a gradual ascent to 4.29% on Oct. 31. The Fed cut 25 more points in November, and another 25 points on Dec. 18. The 10-year yield kept climbing to a peak of 4.79% on Jan. 14.
This climb in yields coincided with a rebound in consumer-price inflation that the Fed didn’t expect. After flattening through October, the consumer-price index rose 0.3% in November, 0.4% in December, and 0.5% in January. The FOMC hadn’t conquered inflation...
(Excerpt) Read more at wsj.com ...
WSJ = Murdoch/Dominion/Fox News Trump haters...
It all confuses me...
Politicians and financiers seem to be playing games with our grandchildren’s and great-grandchildren’s future...
Ankle biting Jasmine Crockett/AOC Trump haters
How much control should a small group of unelected people with very narrow life experiences have over our society?
That is the real issue. The alternatives are
1) Continued control by a small unelected group
2) More action by Congress. We are in the current situation because Congress did not have the guts to do what they knew needed to be done... So Congress punted to this unelected body.
3) More free market capitalism. We are a mixed economy of capitalism and socialism. We will continue to be a mixed economy. But maybe technology and other factors indicate a new mix is needed.
Money should be scarce.
Politicians -- and I include Trump as the worst offender right now -- like to blame the Fed for high interest rates, but the debacle known as the "Big Beautiful Bill" and its endless multi-trillion dollar deficits is the real culprit here.
I’d you can’t debate with facts and logic the resort to the tactics of the left and just name call instead. The WSJ is correct. They didnt go far enough. Trump can do zero to lower the longer term rates if he keeps spending and borrowing like mad. The fed can do nothing to lower long rates.
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