Forex
Fed Fails to Convince Markets on Inflation Target
US Treasury yields are set to resume their decline if the Federal Reserve fails to provide clear guidance on how it plans to meet its 2% inflation target, according to Mark Cabana of Bank of America's Global Research. The recent selloff in long-dated Treasuries drove yields to nearly two decades high last week.
The sell-off was a 'textbook inflation credibility shock,' said Cabana, who attributed it to Fed Chairman Kevin Warsh's inability to explain how the central bank would tame rising prices at a press conference. The market is still waiting for clear communication from the Fed on this issue.