Walsh stressed the short-end return on inflation-resistant US debt

On 28 August, the rate of return on United States short-term national debt rose. In a very market-sensitive speech, Federal Reserve Chairman Walsh stressed the need for the Federal Reserve to contain rising consumption prices, thereby easing some of the market ' s concerns about its ability to fight inflation. During his speech, short-term United States debt was sold and long-term United States debt rose. The rate of return on the United States debt rose from 5 basis points to 4.28 per cent for the biennium and declined from 1 basis point to 5.19 per cent for the 30-year period. Both changes indicate that the market expects that the Fed may need to increase short-term interest rates. Since his first press conference in June, bond traders have had doubts about his policy position. At that time, Walsh stressed the need to lower inflation and showed a hawk-like stance. Since the global economy reopened from the epidemic in 2021, inflation in the United States has been above the Fed's 2 per cent target. In July, however, the Fed again maintained interest rates, and Walsh did not reveal whether the interest rate could be increased this year. The rate of return on long-term United States debt subsequently increased significantly, as traders demanded higher returns to compensate for the risks of increased inflation. Walsh warned on Friday that inflation had not experienced a meaningful slowdown and that policymakers had to be convinced that inflation was improving, otherwise the central bank “had to do”. He also reiterated that policymakers would bring inflation back to the 2 per cent target and stressed that the target was clear and fixed. Kim Xian