Philip Wee of DBS Group Research highlights that US Treasury yields have eased as PCE inflation moderates, but headline inflation remains elevated, keeping real Fed Funds Rates in focus. New Fed Chair Kevin Warsh faces a divided FOMC at the June meeting, with prior votes split on cuts and guidance. Markets see this as part of a broader shift toward a potentially lower US rate regime.

Warsh faces divided FOMC in June

"The US Treasury 10Y yield eased by 11 bps in the first four days of this week to 4.447%, down significantly from its 4.685% peak on May 19."

"US PCE inflation decelerated from 0.7% MoM in March to 0.4% in April, while Core PCE inflation slowed to 0.3% to 0.2%."

"In YoY terms, headline inflation rose to 3.8% from 3.5%, fuelling concerns among some Fed members that the 3.50-3.75% real Fed Funds Rate was below its neutral zone."

"However, Bessent expects US disinflation to return, driven by lower oil prices."

"But newly sworn-in Fed Chair Kevin Warsh will still face his first true test at managing a divided Fed at the June 16-17 FOMC."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)