The Federal Reserve’s recent actions have raised concerns that they may have intentionally engineered the most significant financial crisis in a century.

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This crisis has unfolded by design, leading to significant shifts in market expectations and Fed policy.

In a recent development, the 10-Year Note Yield has surged to 4.45%, a level not seen since November 2007. Markets have adjusted rapidly to this change, with rate cuts no longer being priced in until September 2024. Just three months ago, the expectation was for four rate cuts by the end of 2023, but now the possibility of another rate hike by December is back on the table, and rate cuts are not expected for a year.

This shift indicates that the Fed is more hawkish than anticipated. They’ve held the benchmark rate within the 5.25-5.5% target range, with 12 officials foreseeing one more hike this year and 7 expecting it to remain on hold. Median rate forecasts for 2023 and 2024 have also changed, indicating a more aggressive stance.

The 10-year yields are hitting 16-year highs, potentially signaling concerns about inflation. Historically, the Fed’s policies have influenced markets mainly through their statements. However, over the past two years, a growing number of market participants have become skeptical of the Fed’s intentions, leading to a lack of confidence in their guidance. To bring inflation back under control, the Fed must regain the confidence of the markets, which is now a significant challenge.

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