Economy

Bond yields creep higher as markets wait for Fed signals

Bond yields creep higher as markets wait for Fed signals”

Shares were treading water on Wednesday while rising Treasury yields kept the dollar steady, as investors waited to hear whether the world's most powerful central banker would confirm or confound expectations for a USA rate cut this month.

Powell stressed that the USA economy is still growing, albeit at a slower pace, as a record-long expansion begins its 11th year. The president has been Powell's harshest critic, and in recent days hinted about his authority to demote or fire him. President Donald Trump's trade wars have magnified uncertainties.

Some economists have suggested that if the Fed surprises the markets late this month by choosing not to cut rates, it might be because Powell and other Fed policymakers don't want to be seen as having caved to Trump's relentless pressure. Meanwhile, inflation has fallen farther from the Fed's target.

Investors expect the Fed will cut its benchmark rate, now in a range between 2.25% and 2.5%, by a quarter percentage point at its 30-31 July meeting.

Federal Reserve Chairman Jerome Powell says "many" Fed officials believe a weakening global economy and rising trade tensions have bolstered the case for looser interest-rate policies.

Many investors have put the odds of a rate cut this month at 100 per cent.

SYDNEY, July 10 (Reuters) - Asian shares pulled ahead on Wednesday while rising Treasury yields lifted the dollar as investors waited anxiously to hear if the world's most powerful central banker would confirm or confound expectations for USA easing this month.

Futures are still fully priced for a 25-basis-point cut at the Fed's July 30-31 meeting, but have abandoned wagers on a half-point move. The Fed has raised rates nine times since 2015, four increases coming under Powell's leadership. "He's not doing that". "Pack up. It's time to go'".

"I can't hear you", Waters replied, eliciting laughter in the hearing room.

Financial markets too were looking for a clear signal about whether the central bank will cut lending rates later this month, and after a blowout United States jobs report on Friday investors became concerned the Fed might make them wait.

Powell said the Federal Reserve had recently convened a meeting to discuss Libra, but that inter-agency working groups like the Financial Security Oversight Council (FSOC) had not had a chance to meet on the topic yet.

But Trump's statements spooked financial markets so decisively, and the threats to the global economy became so palpable, that a rate cut of at least 25 basis points now appears a near certainty, with a 50-basis-point cut also considered possible as extra protection.

- CBS News' Irina Ivanova contributed reporting.



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