As the figure’s top panel shows, U.S. 10-year Treasury note (bond) yields have been very volatile since May. Yields fell more than 75 basis points from May 1 to their nadir June 13, before soaring— more than 125 basis points—after the FOMC’s June 25 statement. Many financial analysts blame the Fed’s announcements for this disorder. For example, the FOMC announcement of May 6 was widely interpreted to herald sustained lower short-term rates and/or the purchase of long-term bonds by the Fed to effect “easier ” monetary policy: “...the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level. ” In contrast, the financial press interpreted a less-than-expected federal funds target cut and an almost identical press release following the June 2
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