People attending a meeting of the Federal Reserve Board in Washington, DC.
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U.S. Treasury yields were little changed Wednesday as Wall Street’s review of July inflation data showed that it was in line with expectations and that price increases may continue to slow.
The yield on the 10-year Treasury note, a key indicator for pricing mortgages, auto loans and credit card debt, rose less than 1 basis point to 4.69%.
The two-year Treasury yield, which more accurately reflects expectations for the Federal Reserve’s interest rate policy, fell by more than a basis point to 4.203%. The yield on 30-year government bonds rose more than 1 basis point to 5.254%.
One basis point equals 0.01%, and yield and price are inversely proportional to each other.
The consumer price index inflation rate in July increased by 0.1% compared to June, expanding at an annual rate of 3.4%, down from 3.5% in June. These measures, as well as the monthly and annual changes in core prices, which exclude food and energy costs, were all in line with economists’ Dow Jones consensus expectations.
The latest CPI report will influence what actions Federal Reserve policymakers take at their next meeting in September. At its last meeting in July, three opponents voted in favor of raising interest rates from the current range of 3.50% to 3.75%, but last Friday’s weaker-than-expected July jobs report led some investors to conclude that a September rate hike was less likely.
“Overall, the announcement was as expected and leaves the door open for the Fed to pause in September, but it is by no means definitive,” said Ian Lingen, head of U.S. rates at BMO Capital Markets. “September decisions will depend on the combination of August employment numbers and CPI.”
Producer price index data for July will be released on Thursday after last month’s release for June was softer than expected.
