Way back in the 1970s, there was a TV commercial that had the tagline: “When EF Hutton talks, people listen.” That was a good way to characterize what went on yesterday, as Jerome Powell, the new Chairman of the Federal Reserve, gave his first press conference. A lot of people were listening to the central bank chief because what the Fed says often has real-world consequences.
This may be a difficult question for many people to answer because interest rates have generally been on a downward trend for a long time. Rates hit a major peak back in 1981 of about 16%. The chart below shows the 10-year yield during the past 55 year period. ‘Loose’ US official interest rate policy has played a big role in keeping rates low in recent years. But with economic growth strong, consumers and businesses confident, and wages moving up, Federal Reserve policies are changing and becoming ‘tighter’. Yields on 10-Year Treasuries seem likely to move above 3% soon.