The Federal Reserve's rate cut causes a surge in government bond yields:
The Federal Reserve has lowered interest rates by 100 basis points this year, from 5.50% to 4.50%.
At the same time, the 10-year government bond yield has surged by 100 basis points since September, reaching its highest point in six months.
At this point, inflation has officially started to rise again.
The Federal Reserve itself has raised its PCE inflation expectation from 2.1% in September to 2.5% in 2025.
The central bank now expects the inflation rate to drop to the target level of 2% by 2027, instead of the previously projected 2026.
Buckle up for a turbulent 2025!
The bigger the waves, the bigger the fish!