Concerns Over Persistent Inflation Despite Powell's Emergency Measures

US Treasury Yield Surpasses 1.4% Intraday
Powell Says "3 Years to Reach Inflation Target"

[Asia Economy New York=Correspondent Baek Jong-min] The US 10-year Treasury yield, which has shaken the global stock market, approached 1.43% intraday on the 24th (local time). Federal Reserve (Fed) Chairman Jerome Powell, following his statement the day before, took urgent measures, saying it could take three years to reach the '2% inflation target.'

[Image source=AP Yonhap News]

On the morning of the day, the US Treasury market and stock market focused on the sharp rise in Treasury yields. The 10-year Treasury yield, which had risen to 1.39% the day before, surged to 1.429% amid heavy selling. The yield curve also rose sharply.

The US Treasury yield showed similar movements as the previous day. It surged before the stock market opened and then declined following Chairman Powell's congressional remarks.

Some experts' predictions came true as Powell did not specifically mention the sharp rise in Treasury yields during his Senate testimony the day before, only referring to maintaining zero interest rates and asset purchase programs for a prolonged period even if inflation exceeds 2%, which could have further stimulated Treasury yields.

On this day, Chairman Powell responded more firmly. Appearing before the House Financial Services Committee hearing, Powell stated, "It may take more than three years to reach the inflation target." He also dismissed inflation concerns, saying, "There is pressure to ease inflation globally, and fundamentally, all major advanced economy central banks are struggling to reach the 2% inflation rate." After Powell's remarks, Treasury yields fell back to the 1.3% range.

Experts' opinions on Powell's remarks are divided. Edward Moya, an analyst at trading firm OANDA, explained, "Powell's remarks are not significantly different from yesterday's," and that the sharp rise in yields was an overreaction by the market.

However, concerns remain that the $1.9 trillion stimulus package being pushed by the Joe Biden administration could trigger inflation. On the same day, the US National Retail Federation (NRF) forecasted that US consumer spending would grow by 6.5 to 8.2% this year. An expansion in consumer spending can be a factor that drives up prices.

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