Traders Anticipate Almost 50% Chance of Rate Hike After Warsh's Speech
The US stock market held steady on Friday, despite rising expectations for the Federal Reserve to raise interest rates soon. The S&P 500 rose 0.3%, and the Dow Jones Industrial Average was up 89 points, or 0.2%. The Nasdaq composite also gained 0.3% as of 10:45 a.m. Eastern time.
The bond market had more of a reaction following Kevin Warsh's speech at an annual economic symposium in Jackson Hole, Wyoming. Warsh, the new Fed chairman, reiterated his commitment to getting inflation under control and keeping the job market strong.
Warsh emphasized that short-term interest rates are the predominant tool for the Fed to achieve its twin goals, but also stated that broad financial conditions are not restrictive enough to slow down the economy and inflation. This has led traders to bet on a nearly 46% probability of the Fed hiking its federal funds rate as soon as next month.
Longer-term yields were mixed, with the 10-year Treasury yield holding steady at 4.67%, while the 30-year Treasury yield fell to 5.16%. The US Treasury Department made an unusual move last week to intervene in the bond market after yields got too high for long-term bonds.