Ace WSJ Federal Reserve reporter Jon Hilsenrath is out with a new article suggesting that the FOMC will likely discuss revising its forward guidance targets at next week’s policy meeting, which takes place July 30-31.
Fed Chairman Ben Bernanke suggested in a recent speech that the 6.5% unemployment rate threshold the Fed has described as necessary to reach before the central bank will begin raising interest rates may actually understate weakness in the labour market. So, the idea is that perhaps the Fed will lower that threshold, implying that easy money will be the status quo longer than markets previously expected.
The market is taking the news quite credibly. The chart below shows the big move in 5-year U.S. Treasury notes following the release of the article.
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