10-year U.S. government bond rates, the benchmark for market interest rates, hit their highest level since the 2008 global financial crisis. A senior U.S. Federal Reserve official’s remarks that the key interest rate should continue to be raised to curb inflation seem to have put pressure on it.
According to Bloomberg News on the 20th (local time), the 10-year U.S. government bond rate stood at 4.228% as of 3:30 p.m., up 0.09% points from the previous day. This is the highest since June 2008, during the financial crisis. The two-year U.S. government bond rate, which is sensitive to the benchmark interest rate, also rose 0.06% points to 4.619%.
The rise in government bond rates accelerated after Philadelphia Fed President Patrick Harker’s public remarks that “the year-end benchmark interest rate will well exceed 4 percent.” “We will continue to raise interest rates for the time being,” Harker said in a speech to the regional chamber of commerce in New Jersey. “The inflation rate rises like a rocket and then falls like a feather,” Harker said, predicting that the current inflation rate of more than 8% will fall to 6% at the end of the year and 4% at the end of next year, respectively, and will fall to around 2% at the end of 2024.
The market believes that the Fed is likely to take four consecutive giant steps (interest rate hikes of 0.75% points) at the Federal Open Market Committee (FOMC) regular meeting held on the 1st and 2nd of next month. Some predict that interest rates will reach 5% early next year by raising them by a similar margin in December. Currently, the U.S. benchmark interest rate is 3.00 to 3.25%.
The U.S. Department of Labor’s announcement last week (October 9-15) that the number of new claims for unemployment benefits decreased by 12,000 from the previous week also supports this observation. This is because the strong labor market is seen as a sign that there is room for further interest rate hikes. The number of new claims for unemployment benefits last week was 214,000, the lowest in three weeks.