Bond Market Wields Power Over FOMC Meeting Expectations

The September Federal Open Market Committee (FOMC) meeting is approaching, and expectations are high for potential action to address inflation and employment. The latest jobs report showed stronger-than-expected numbers, but inflation remains above the central bank's 2% target.

Treasury Secretary Scott Bessent recently made comments that may provide insight into the White House's perspective on the FOMC meeting. Speaking at the Economic Club of New York in June, Bessent expressed confidence in Fed Chair Kevin Warsh's ability to optimize economic growth and inflation. He noted that 'the bond market has taken down more governments than howitzers,' suggesting a deep respect for the market's power.

This acknowledgment of the bond market's influence may give the FOMC room to operate, despite any pressure from the White House. Bessent also recently launched a multi-billion-dollar Treasury buyback scheme that briefly pushed yields lower, ensuring greater market liquidity.