Fed Keeps Inflation in Focus as Treasury Yields Hover Near 4.7% Amid Global Uncertainty

BlockBeats report: Aug. 24 — Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he sees no signs of dysfunction in the U.S. Treasury market. With the 10-year yield hovering around 4.7%, he described the level as high but not historically abnormal, arguing the Fed can continue to prioritize inflation control rather than react to moves in bond yields. The comments suggest that even as U.S. government debt tops $40 trillion, the Fed is unlikely to make long-term bond-market stabilization a near-term policy goal. That stance differs from the U.S. Treasury's recent push to lower financing costs by expanding buybacks of longer-dated bonds. While the Treasury is seeking to bring down long-term yields, the Fed has not signaled policy coordination. As a result, long-end rates are expected to remain driven mainly by inflation expectations, fiscal supply, AI-related capital demand, and term premia. If the Treasury's efforts fail to cap yields sustainably, markets may place even more weight on U.S. fiscal fundamentals in bond pricing. In Japan, market pricing for a Bank of Japan rate hike on Sept. 18 has climbed to about 82%, up sharply from levels seen ahead of the July meeting, pushing the yen back toward 160. Additional pre-meeting signals from BOJ officials could strengthen the yen and increase pressure for capital to flow back to Japan, reshaping global allocations across bonds and risk assets. Separately, the breakdown in U.S.-Canada trade talks and Washington's move to impose higher tariffs on Canadian goods have revived concerns over supply-chain disruption and renewed inflation pressure. Against a backdrop of U.S. fiscal strain, energy- and trade-driven inflation risks, and the potential for U.S.-Japan policy divergence, investor focus is shifting from rate-cut expectations to whether global funding costs can remain stable. This week's Jackson Hole symposium will be a key checkpoint: Chair Jerome Powell's remarks on inflation, long-term yields, and the Fed's policy framework are expected to influence subsequent pricing for the dollar, U.S. Treasuries, and risk assets.