Federal Reserve Governor Michelle Bowman said economic growth has gained momentum this year and that recent consumer price index data suggests inflation pressures may persist. The transmission channel runs through inflation repricing: sticky CPI readings push back expectations for the timing and extent of policy rate cuts, which lifts real yields and tightens financial conditions. Front-end Treasury yields and rate-sensitive assets are most exposed, since a higher-for-longer path affects discounting of near-term cash flows and borrowing costs for rate-sensitive sectors such as housing and small-cap equities. The US dollar may also firm if rate differentials widen relative to other central banks. Traders will watch the next CPI release and the core services ex-housing component closely, as a further upside surprise would reinforce the persistence narrative and sharpen the repricing in Fed funds futures.
FED'S BOWMAN SAYS ECONOMIC GROWTH GAINED MOMENTUM THIS YEAR AND THAT CPI DATA SUGGESTS INFLATION PRESSURES MAY PERSIST
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