Overview
- The Federal Reserve, which kept the federal funds rate at 3.50% to 3.75% on Wednesday, logged its highest level of disagreement in decades as three officials opposed adding an easing bias and one pushed for a cut.
- Following the decision, traders sold short-dated Treasuries and lifted the two-year yield to about 3.95%, while the 30-year approached 5%, reflecting a shift toward higher-for-longer borrowing costs.
- Market pricing moved further, with Bloomberg reporting roughly a 50% chance of a rate increase by April 2027, signaling greater uncertainty about the Fed’s next move.
- Oil prices jumped after reports of a continued Strait of Hormuz blockade and a possible U.S. briefing on action against Iran, with Brent briefly crossing $126 a barrel and reviving inflation worries tied to energy costs.
- Treasury yields were steady Friday as investors weighed fresh data showing Q1 GDP at a 2% annual pace and March PCE inflation up 0.7% on the month and 3.5% on the year, with core PCE at 0.3% and 3.2%, measures that shape expectations for the Fed’s next steps.