Why the Yield Curve Steepening Is Rattling the Fed

The ten-year Treasury yield has surged to 4.68 percent, its highest in months, while inflation expectations are actually falling. Lucas and Luna explain why this disconnect between nominal yields and breakeven rates is sending a warning signal to the Federal Reserve. They break down what rising real yields mean for monetary policy transmission, how Fed governor Kevin Warsh's recent three-phrase vocabulary hints at the central bank's concern, and whether the steepening curve could force the Fed to adjust its balance sheet runoff plans. With the federal funds rate stuck at 3.63 percent and the interest on reserve balances at 3.65, the bond market is doing some of the Fed's tightening work for it—but that may not be enough to tame the inflation that still lingers in services. A sharp, accessible look at the mechanics of yield curve control in a post-pandemic era. #FederalReserve #YieldCurve #TreasuryYields #MonetaryPolicy #KevinWarsh #Inflation #BreakevenRate #RealYields #BondMarket #FedFundsRate #InterestOnReserves #SteepeningCurve #FOMC #Economics #Macro #FexingoBusiness #BusinessPodcast #CentralBanking Keep every episode free: buymeacoffee.com/fexingo