Bond market shows limited expectation for Fed rate hikes despite inflation concerns

The bond market appears to be "looking through" the threat of long-term inflation, pricing in only slightly more than a single Federal Reserve rate hike. The benchmark 10-year Treasury yield was at 4.49% as of July 7th, testing the upper bound of its 4.0% to 4.5% trading range, while the headline inflation rate moved above 4%. A Federal Reserve model suggests the policy rate will increase by only 30 basis points from the current effective federal funds rate of 3.65%, indicating the Fed is assessing immediate inflation risks.