Despite signs the economic recovery in the US is slowing we expect the FOMC to shy away from making any major policy changes when its meeting concludes later on Wednesday. But we would not rule out a strengthening its forward guidance, if not at this meeting then fairly soon, to suggest that it will not raise interest rates until inflation rises consistently above the Fed’s 2% target. Such a move would make it even more likely that nominal Treasury yields remain very low for some time and may put more downward pressure on real yields.
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