With inflation still well above the U.S. Federal Reserve’s target and the unemployment rate now below estimates for the long-run maximum level, the Fed reiterated recent guidance following its January meeting: Officials expect to hike the policy rate in March, kicking off a series of
U.S. Treasury yields started the year with a sharp move higher as investors confront the possibility that the U.S. Federal Reserve may not only embark on an accelerated rate-hiking cycle, but also bring forward the timetable to begin reducing the size of its balance sheet.
While the overall pace of core U.S. inflation in December 2021 remained strong, underlying details in the Consumer Price Index (CPI) data suggested some stabilization from the recent reacceleration. This reinforces PIMCO’s outlook for U.S. inflation to begin to moderate, likely peaking in February and