Treasury Yield Curve
The yield curve continued to flatten as short-term interest rates rose relative to longer-term rates. The Federal Reserve has made clear its intention to normalize interest rates with at least one more increase in 2018 and perhaps two or three more in 2019. Being data driven, the Federal Reserve is expected to adjust its plan as conditions warrant.
Inflation, as measured by the Consumer Price Index, is now solidly above the Federal Reserve’s target of 2.0%. While the trend does not appear likely to result in a 3.0% average, a higher level could prompt the Fed to take a more aggressive posture toward interest rates in 2019.
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