A day early and a hike short

The Fed held rates steady this week, but strong GDP and rising inflation data released the next day suggest they may have erred. Third-quarter GDP hit 3.4%, its fastest pace in a year. Meanwhile, PCE inflation ticked up to 0.5% month-over-month, with core at 0.3%, leaving annual rates well above the 2% target.

Despite the FOMC statement acknowledging strong economic activity and resilient spending, some officials apparently needed more data to hike. This suggests a potential misjudgment given the robust figures that followed.

Separately, Treasury bill issuance can incrementally boost short-term yields. This occurs as the Treasury may offer slightly higher rates to absorb new supply, potentially pushing other short-term investment yields higher.