Fed Brainard Raises Concerns Over Bond Market Moves
Lael Brainard, a senior Federal Reserve official, has raised some concerns over bond markets over the past week as they have raised alarms for the US central bank. Fed Brainard stated that she will be paying close attention to market developments as some of the moves and their speeds last week managed to catch her eye. She further mentioned that signs of disorderly conditions or persistent tightening in financial conditions would be concerning as that would slow down the progression of the central bank’s goals to reach a strong labor market and a stable 2% longer-run inflation.
Ms. Brainard’s comments were made after government bond yields soared above 1.6% last week, a rise that shook the financial market. It managed to drop down to 1.41% this week, however, Fed Brainard doesn’t believe that the rise in inflation was responsible for bond market sell offs deteriorating last week.
Instead, rises in bond yields are believed to be driven by investors assuring that growth and inflation will be much higher this year. This in turn could usher the Fed to retrieve its support in place for the economy and markets sooner than they had expected. While Fed officials have maintained that they will be tolerant in keeping the policy help in place and although they do expect price gains to appear later in the year, the increase is not expected to last.
Fed Brainard’s comments haven’t had a significant impact on market sentiment, the S&P 500 Index was down 0.14% on a daily basis at 3,896 and the Dow Jones Industrial Average was rising 0.1% at 31,570.