Why the rise in US interest rates is capped

Editor's note: Given events since this post was written, validating its view that rates will rise more slowly than anticipated in August, we are putting it outside the paywall.
Today's commentary
Summary: the same people who have been screaming inflation for the past few years are now saying that interest rates are finally about to explode. This is alarmist nonsense that disregards the influence policy rates have over the term structure of rates. It also disregards real economy feedback loops. I explain here.
I have often said that the Fed exerts a dominant influence across the yield curve, not just on the short end. And by this I meant that long-term interest rates on government liabilities are really a series of future short-term rates. It tells you that the interest rates of tomorrow...


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