The 10-year Treasury yield reversed its two-day slide on Friday after Austan Goolsbee, president of the Chicago Fed, urged caution about further rate cuts. He warned that the central bank should not rush to lower rates further after already delivering three reductions since September.
The benchmark 10-year note rose by more than 5 basis points to 4.192%, while the 2-year note edged up over 1 basis point to 3.541%. The 30-year bond climbed more than 6 basis points to 4.852%. (One basis point equals 0.01%; yields and prices move in opposite directions.)
In an interview with CNBC, Goolsbee said he is "pretty optimistic" that rates will be "a fair bit lower" in 2026, but he has grown uncomfortable front-loading too many cuts and assuming that the inflation trend will be transitory. He also suggested that policymakers should have waited for more data before announcing additional cuts, even though he voted for rate reductions at the Fed’s September and October meetings.
Goolsbee, an MIT economics PhD, spoke after the Fed’s third rate cut since September, announced on Wednesday. The 10-year yield started at about 4.21% before the decision, dipped to around 4.10% on Thursday, and then recovered on Friday.
Investors continue to speculate about the Fed’s next move, with chatter about a potentially more dovish leadership someday taking the helm.
As 2026 approaches, policymakers will need to balance supporting the labor market with cooling inflation. The Fed may be more inclined to cut again if labor-market conditions soften.
Powell signaled that recent months have seen some negative job growth, arguing that a weaker labor market would justify easier policy. He noted that gradual cooling has continued, with surveys of households and businesses showing a reduced supply and demand for workers. In his view, the labor market has cooled a little more gradually than anticipated.
In other news, the Fed on Thursday reappointed 11 of its 12 regional bank presidents, ending speculation about political interference by critics who questioned appointments to the Fed’s regional leadership.
— CNBC’s Jeff Cox contributed to this report.
