Yield Curve Steepens as Markets Lose Faith in Fed's Inflation-Fighting Pledge

The U.S. Treasury yield curve steepened this week after the Federal Reserve's decision to leave interest rates unchanged, suggesting that markets are losing confidence in the Fed's commitment to fight inflation.

Despite Fed Chair Kevin Warsh's insistence on Wednesday that policymakers 'will not hesitate to act' if price pressures fail to ease, analysts say the steepening of the yield curve indicates growing skepticism about future rate hikes.

The yield curve steepened after a sharp shift towards a steeper U.S. Treasury bond curve following the Fed's decision to leave interest rates unchanged this week.

Zachary Griffiths, head of macro and investment grade strategy at CreditSights, described the move as a 'twist steepener' and an 'unhealthy response' to the Fed's policy decision.