Things Are Not All that great with the economy

In addition to the inflation problem, the economy is decelerating. Economic growth is slowing. The consumer is assuming more credit card debt to pay for items and fuel costs are soaring. This is a very difficult environment for the Fed to hike rates aggressively.

Moreover, consumer sentiment and small business sentiment are down sharply with the former at 11-year lows. In this environment with high inflation and low consumer sentiment, the Fed may try to be more patient with a hike rate and wait before approaching. Seeing the 10-yr Note yield decline beneath 2.00% suggests the bond market is not worried about runaway inflation but may be looking at the notion of slower economic times ahead.

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