Two broad sets of news this week: the Fed, interest rates and the economy; and a string of deeply reassuring political-economic events. The Fed raised the overnight cost of money by 0.25 percent and long-term rates fell slightly. That’s a fact. But many of the explanations verge on fables: the economy is tanking, inflation is falling and the Fed is done with hikes. The U.S. 10-year Treasury note defines long-term interest rates here and worldwide. The 10-year jumped on the day after the election last fall, from 1.85 percent to 2.15 percent, in another 10 days to 2.35 percent, then 2.60 percent, and ever since has stayed in that 2.35 percent-2.60 percent range. In the two weeks before the Fed hike this week, the 10s market tried and tried to break through 2.60 percent going upward, failed, and has settled about 2.50 percent. Four-and- a-half months, and still smack in the middle of that range. We can make heroic efforts toward an alternate story (perhaps blaming Brit...
- The Fed raised the overnight cost of money by 0.25 percent and long-term rates fell slightly. The Fed’s next hike, or the one after that, will bulldoze long rates higher.
- In her quiet way, Fed Chair Janet Yellen acknowledged for the first time useful and thorough meetings with Treasury Secretary Mnuchin.
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