Deutsche Bank analysts highlight patient-sounding Federal Reserve commentary as officials stress the need for more evidence of inflation moving toward 2% before easing. Governor Barr signalled rates may stay steady for some time, prompting markets to slightly reduce 2026 rate-cut pricing. Two-year Treasury yields edged higher, while longer maturities were little changed, leading to modest curve flattening.

Fed rhetoric reins in cut expectations

"Alongside the data, we received some patient-sounding Fed commentary."

"Fed President Goolsbee reiterated that further evidence of inflation moving back towards 2% would be required before easing, while Fed Governor Barr said that “it will likely be appropriate to hold rates steady for some time”."

"Markets slightly dialed down expectations for rate cuts, with 60bps of 2026 easing priced by yesterday’s close (-2.3bps on the day)."

"In turn, 2yr Treasury yields edged higher (+2.7bps), while 10yr (+1.1bps) and 30yr (-0.6bps) saw muted moves, resulting in some curve flattening."

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