Inflation concerns and Fed hike risks (with Katie Greifeld)

1/28/2026 5:43:02 PM	medium term cautious up	20 days later	-3.50%	-1.75%
1/15/2026 9:52:03 AM	medium term down	20 days later	-0.50%	+0.50%

Asked whether the market is right to take the possibility of a Fed hike seriously.

Katie Greifeld

Gene Tannuzzo

US bond investors have been the most complacent about pricing in the potential for hikes. The problem is beyond tariffs and oil/energy inflation. Core services excluding housing (super core) is at 3.4% and accelerating this year. With Fed funds rate barely above that, the market could price in two hikes (50bp) over the next year.

Agrees with Priya's characterization that labor market is less of a focus versus inflation which has been hotter.

Asked about Citadel's view that a Hormuz reopening could lead to a 12bp drop in 10-year yields.

Katie Greifeld

Gene Tannuzzo

In the short term there's some truth to that - oil and 10-year have moved in lockstep since February. But the inflation concern is less about oil in the bigger picture. It's the underlying core services inflation driving Fed decision-making. Hard to say markets are underpricing a peace deal risk when equities are at all-time highs and credit spreads are at all-time tights.

Lower oil could mean lower Treasury yields for a short time, but it won't cause the Fed to change its posture.

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