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Yields Mixed after FOMC Meeting, Tariffs

Yields ended the week mixed, as the long end of the curve declined slightly while the short end of the curve was pushed higher following Wednesday's FOMC meeting.  While the Fed's decision to raise their target overnight rate by 25 bps was widely forecast, the unexpected component of the release was the upward revision to the estimated number of rate hikes this year.  Prior to this meeting, FOMC members had stated their intention for three rate increases this year.  The "dot plot" incorporated in the release following the meeting indicated that policymakers now expect four rate increases (which would result in another two this year). 

That expectation also weighed heavily on economic forecasters, who are concerned that an inversion of the yield curve (where short rates are higher than long rates) will presage a recession in the near future.  The risks of a trade war also weighed on the market, as China seems likely to retaliate against President Trump's new tariffs.

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