Has the Fed Accepted 3% Inflation? (With Jim Bullard)

This episode of On Investing examines the recent rise in global bond yields and what it means for investors. Liz Ann Sonders and Collin Martin discuss Fed policy, inflation expectations, fiscal concerns and the effect of higher yields on stocks. Liz Ann also interviews former St. Louis Fed President Jim Bullard about tolerating inflation near 3% versus the 2% target, AI and productivity, geopolitics and markets.

1. Long-term Treasury yields have risen due to the Fed’s hawkish posture, elevated uncertainty premiums, fiscal concerns and a global move higher in interest rates.
2. Inflation expectations remain relatively well-behaved, suggesting the yield rise is less about runaway inflation fears and more about uncertainty, government borrowing needs and a higher-for-longer rate environment.
3. Higher yields particularly affect growth-oriented sectors, real estate and utilities, and investors may be in a more volatile “Temperamental Era.”
4. Jim Bullard argues the Fed risks falling behind the curve by tolerating inflation near 3% rather than returning it to its 2% target.