Powell On Steepness Of Curve and Recent Bond Market Action

Q: Would you prefer the Tsy curve to be a little steeper? What do you glean from the last 6 weeks in bond markets?

• A: The short end actions are easy to understand: reacting to changes in expectations for policy. A lot of things go into the long rates and the place I would start is just look at global sovereign yields around the world, JGBs, Bunds, so much lower. You can get a much higher yield on U.S. treasuries ... it's not surprising there's a lot of demand for US sovereigns. I also think there may be some assessment in there of what the neutral /terminal rate is. "I don't know about that." We'll make policy based on what we're seeing in the economy rather than based on what a neutral, what a model might say the neutral rate is. In the last cycle we ended up cutting rates 3 times after raising them.
• So I'm not worried about where the long bond is. I see that the yield low. We're really focused on broader financial conditions, maximum employment and price stability.