FX.co ★ US 10-Year Yield Pulls Back After CPI

The yield on the 10-year US Treasury note edged down to 4.17%. This figure is close to the highest level seen in four months, though it stood below the highs observed during the trading session. The slight decrease occurred as recent inflation data reinforced the belief that the Federal Reserve could have the opportunity to lower interest rates within the year. Specifically, core inflation remained unchanged in December unexpectedly, while overall inflation continued at the anticipated rate of 2.7%. However, elevated figures in core services bolstered the stance of more hawkish members of the Federal Open Market Committee (FOMC), who express concerns about persistent inflation despite evidence suggesting the labor market has remained stable, maintaining its trends of low hiring and minimal layoffs. Market expectations, as seen in rate futures, are divided on whether the Federal Reserve will implement two or three rate cuts this year—exceeding the expectations of FOMC members themselves. Additionally, the Department of Justice's focus on Fed Chairman Powell, linked to the Fed's higher rate policies, and uncertainties surrounding the composition of the FOMC after the Chairman's term concludes, have contributed to creating a steeper Treasury yield curve.