Source: US Dept. of Treasury End of Day
• Rates moved slightly lower last week with the 2-year falling three basis points to 4.80% while the 5-year Treasury notes fell two basis points to 5.03%.
• Expectations for an October Fed rate hike have eased as softer inflation data, slower job growth, and less-hawkish commentary from Fed officials reduced the urgency for immediate policy tightening.
• Markets may be too quick to rule out another rate hike, as upcoming CPI and retail sales reports could strengthen the case for additional tightening if inflation and consumer spending remain firm.
• Consumer sentiment remains weak even as spending holds up, highlighting a growing divide between wealthier households benefiting from stock market gains and lower-income consumers facing affordability pressures.
• A resilient labor market gives the Fed flexibility to keep rates higher for longer, but the risk to economic growth rises if higher borrowing costs begin to slow AI-driven investment, equity markets, and consumer spending.
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