Economic impact of US debt: Setbacks in bond prices - Labor statistics data
The US Federal Reserve cut interest rates for the first time since December 2024 on Wednesday, citing weaker labor market development as the primary reason. However, the move had little impact on government bonds, according to Commerzbank economist Erik Liem.
During his press conference, Federal Reserve Chairman Jerome Powell dampened expectations for further rate cuts, stating ongoing concerns about inflation and the need to maintain a cautious approach to monetary policy to ensure economic stability. The FOMC (Federal Open Market Committee) also acknowledged an increase in downside risks to employment.
The press conference did not provide any new information about the current yield on ten-year note future contracts or ten-year German bunds. The ten-year note future contract fell by 0.12 percent to 112.92 points, while the yield on ten-year German bunds stood at 4.12 percent.
Weekly initial jobless claims fell more sharply than expected, which weighed down bond prices. Despite this, other analysts, including Erik Liem, made note of the comments made during the FOMC meeting. However, Erik Liem did not mention any specific impact on government bonds due to the comments made during the press conference.
The press conference did not change the previously stated forecast of two more rate cuts for the remainder of the year. These claims are watched by financial markets as they are an indicator of overall US labor market trends.
The rate cut comes amid better-than-expected US jobs data, which weighed down bond prices. The US Federal Reserve's rate cut had little impact on government bonds, as noted by Erik Liem. The FOMC emphasizes the need to continue monitoring the risk of persistent inflation.
In a comment, Erik Liem also stated that no one on the monetary policy committee, apart from Trump ally Stephen Miran, had voted for a larger rate cut. This information was not mentioned during the press conference.
In summary, the US Federal Reserve cut interest rates for the first time since December 2024, citing weaker labor market development as the primary reason. However, the move had little impact on government bonds, and the FOMC emphasizes the need to continue monitoring the risk of persistent inflation. The press conference did not change the previously stated forecast of two more rate cuts for the remainder of the year.
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