on where they thought interest rates would go, they were split on what would happen next year: Half thought they would be leaving their target range on overnight rates near zero. Most of the rest thought they would raise the range by a quarter of a percentage point. Judging by Fed Chairman Jerome Powell’s remarks, more policy makers might now be leaning toward a single, quarter-point increase than before.
The change in the market’s rate odds came about as it became clear that the supply-chain and labor issues that have been pushing inflation higher were proving more persistent than many forecasters had hoped.
But after that, the script switches. Long-term interest rates, which are supposed to reflect investor forecasts of what overnight rates will average over the years, remain low, with the 10-year Treasury lately yielding 1.58%.based off Treasury yields and estimates of “term premia—the fudge factors investors build into Treasury prices as insurance against the risk their rate forecasts are wrong—puts overnight rates at around 1.4% at the end of 2024 and remaining around there through 2031.