Top Fed officials nod to higher bond yields as cause for caution on rates

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A Local Culinary Adventure: inspired by Halifax's Seaport Market | SaltWire #cooking #cookingtipsDALLAS -Top ranking Federal Reserve officials indicated on Monday that rising yields on long-term U.S. Treasury bonds, which directly influence financing costs for households and businesses, could steer the Fed from further increases in its short-term policy rate and substitute the work done by financial markets for formal monetary policy moves by the central bank.

In earlier remarks at the same event, Dallas Fed President Lorie Logan, whose former job as head of the markets team at the New York Fed gives her unique expertise in financial markets, said the higher returns being demanded by investors to hold long-term U.S. government debt could offset the need for further increases in the Fed’s policy interest rate.

Since the Fed last raised its policy interest rate a quarter of a percentage point in July, long-term bond yields have risen a full percentage point. Jefferson noted, for example, that the rise could be driven by investors’ coming to grips with the fact that the Fed may need to keep its short-term policy rate high for a longer period than expected because of the economy’s strength.

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