South Shore school lunch program setting the standard | SaltWire #school #lunch #educationNEW YORK - Strong economic data and worries over sticky inflation are pushing investors to reassess how deeply the Federal Reserve will be able to cut interest rates this year, fueling weakness in the U.S. government bond market.
"The Fed is starting to get ahead of the market because the Fed is saying ‘we're going to cut’ and the market is saying ‘you don't need to because economic activity is so strong,’" said Tony Roth, chief investment officer at Wilmington Trust Investment Advisors. U.S. investment management firm PIMCO said in a 6-12 month outlook report on Wednesday it expects inflation to remain above the Fed’s 2% target. It still believes the central bank will start cutting rates in the middle of 2024, but said sticky inflation may lead to a more gradual path of rate cuts than in other economies.
Additional worries over an inflationary rebound could come if oil prices continue their recent spike. Brent crude settled at its highest level since October on Wednesday following concerns of a widening conflict in the Middle East. Year-to-date total returns - which include bond payouts and price fluctuations - are at minus 2.1%, according to the ICE BofA 7-10 year Treasury Index.