An unexpected increase in inflationary pressure had pushed bonds yields sharply higher in the first quarter and tempered expectations for aggressive Fed easing in 2024. In the second quarter, inflation appeared to settle down again, although both investors and Fed officials are viewing the resumed decrease in price pressure with a cautious eye.

The main reason for the skepticism is the continued resilience of the economy, and corresponding labor market strength. The final reading of Q1 GDP was +1.4% (QoQ SAAR), but second quarter growth appears to have turned slightly higher.

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