US Yields Jump as Fed Dot Plot Boosts Trader Bets on a 2026 Rate Hike

US Treasury yields surged on June 12, 2024, following the Federal Reserve's release of its updated dot plot, which indicated a median projection of one interest-rate hike in 2026. This shift in outlook prompted traders to price in a full 25-basis-point rate increase by the end of 2026, a significant change from previous expectations of rate cuts. The Federal Open Market Committee (FOMC) maintained its benchmark interest rate at a range of 5.25%-5.50% for the seventh consecutive meeting, a level held since July 2023. Fed officials also revised their economic growth forecast upwards to 2.1% for 2024, from 1.7% projected in March, while slightly lowering their inflation outlook to 2.6% from 2.7%. The median projection for the federal funds rate at the end of 2025 remained at 4.1%, implying one rate cut, but the 2026 projection shifted to 4.1% from 3.9%, suggesting a hike. This recalibration of future rate expectations contributed to a notable increase in yields across the Treasury curve, with the 10-year Treasury yield climbing approximately 10 basis points to around 4.30% following the announcement.