Bonds & Rates
Home›Bonds & Rates›Central Banks›Economists warn Fed silence could increase bond and st…
Economists warn Fed silence could increase bond and stock volatility
After the Fed left rates unchanged at 3.5% to 3.75% on July 29, the 30-year Treasury yield rose to 5.22%, its highest level since 2007, according to the report.
Yahoo Finance reports that a Moody's Analytics economist criticized the Federal Reserve's limited forward guidance, arguing that the Fed's reluctance to explain its next steps could leave investors and markets guessing.
The story points to the Fed's July 29 decision to keep interest rates unchanged in the 3.5% to 3.75% range for the fifth consecutive time, with three dissenting regional bank presidents supporting a quarter-point increase amid energy supply shocks that have pushed up gasoline and other goods.
It says Fed Chair Kevin Warsh declined to specify what conditions would prompt a rate increase, and that markets reacted by sending the 30-year Treasury yield to 5.22% on July 29, the highest level since 2007.
Yahoo Finance adds that Moody's Analytics chief economist Mark Zandi warned that insufficient forward guidance could raise volatility in bond and stock markets, lift long-term interest rates through a larger term premium, and potentially contribute to a market sell-off that risks the broader economy.
Latest closeGasoline (RBOB) $2.901 ▼7.3%