Key facts
- US 30-year Treasury yields hit a 19-year high of nearly 5.24%.
- The Federal Reserve maintained its benchmark interest rate for the fifth consecutive meeting.
- US inflation remains above the Federal Reserve's 2% target.
- The US economy grew at a 1.5% annual rate in the second quarter.
- UK central bankers cite the Middle East conflict as the sole barrier to interest rate cuts.
- The Middle East conflict risks keeping oil prices high and fueling inflation.
- Microsoft reported encouraging earnings, while Meta's stock declined due to AI investments.
- The US 30-year Treasury yield reached its highest level since 2007.
- A widening trade deficit and inventory drawdown weighed on US Q2 growth.
- Consumer spending and business investment showed strength in the US Q2 economy.
US borrowing costs have surged to a 19-year high, with the 30-year Treasury yield reaching nearly 5.24% after the Federal Reserve maintained its benchmark interest rate for the fifth consecutive meeting. This decision was made as investors express concerns about the economic impact of rising inflation, which remains above the Federal Reserve's 2% target. The US economy expanded at a 1.5% annual rate in the second quarter, falling short of forecasts. While consumer spending and business investment demonstrated strength, a widening trade deficit and inventory drawdown contributed to the slower growth.
Global stock markets attempted a recovery, buoyed by encouraging earnings reports from companies like Microsoft, although Meta's stock experienced a decline attributed to its investments in artificial intelligence. In a separate development, UK central bankers have indicated that the ongoing Middle East conflict is the sole impediment to potential interest rate cuts in the United Kingdom. They believe the conflict risks maintaining high oil prices and consequently fueling inflation, despite currently low domestic price pressures. Fears of second-round inflation effects persist.
The Federal Reserve's commitment to its 2% inflation target was reiterated by Fed Chair Kevin Warsh. The yield on the US 30-year Treasury, a key indicator of long-term borrowing costs, hit its highest level since 2007. The second-quarter US economic growth of 1.5% missed expectations, with inflation concerns lingering as a significant factor influencing monetary policy decisions.