Fed Provides Flexible Outlook on Rates

January 11, 2019 8:56AM CST

U.S. government bond prices are moving higher and are on positive footing to start this morning, following a reaffirmation by Federal Reserve Chairman Powell that the central bank will be flexible in its outlook in raising short term interest rates this year. This comes amidst a release of inflationary data from China showing a steep decline in consumer and producer prices from last month, the latest evidence of a slowdown in the world’s second largest economy. Consumer prices rose 1.9% from a year earlier, while producer prices increased only 0.9%, which was the lowest rate in two years. The minutes of the December 18 – 19 meeting were released on Wednesday indicating that officials may be close to ending their series of rate increase after raising rates by a quarter of a percentage to a range between 2.25% and 2.50% and penciling in another two hikes in this year. Chairman Powell confirmed that concerns exist over slowing global growth as well as the ongoing trade tensions despite stating that the “U.S. economy is solid’ as well tentative advances between the U.S. and China. Resistance for the March 30-yr bonds is seen around 146 -13 with support coming in around 143 – 31.

30-Year T Bond Mar '19 Daily Chart

30-Year T Bond Mar '19 Daily Chart

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