Fed Chair Powell hints that soaring bond yields could mean end of rate hikes

Federal Reserve Chair Jerome Powell said Thursday that soaring bond yields could help the Fed slow the economy, further cooling inflation and the possibly signaling the end of rate hikes. But he stopped short of declaring victory, citing the economy’s resilience.

“Tight policy is putting downward pressure on economic activity and inflation,” Powell said during a discussion at the Economic Club of New York.

While he acknowledged steady progress on slowing inflation — and the role of rising yields — he still left additional action from the Fed on the table. Whether the Fed raises rates or not depends on the economy’s performance in the coming months. The 10-year Treasury yield was close to breaching 5% on Thursday.

Treasury yields have soared recently on expectations that the Fed will keep rates higher for longer, which could slow the economy. The 10-year Treasury yield fluctuated slightly on Thursday as Powell spoke about inflation and the economy, but continued to hover just under the 5% threshold last breached in 2007.

If economic growth continues to be robust and inflation’s descent stalls, a rate hike in December is in play, though a November pause seems to be cemented. But the Fed chair isn’t ready to make any pronouncements just yet, saying the Fed would continue to proceed carefully.

“A range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little,” Powell said Thursday.

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