Group 1 - The U.S. Treasury Secretary, Yellen, questions the Federal Reserve's interest rate decisions, suggesting that the current two-year Treasury yield indicates that the Fed's benchmark rate is "too high" [2] - The current target range for the Federal Funds rate is between 4.25% and 4.5%, while the two-year Treasury yield is approximately 3.76% [2] - Yellen hints at the possibility of filling two vacancies on the Federal Reserve Board next year, despite Jerome Powell's term as a governor lasting until 2028 [2] Group 2 - The Treasury has been using special accounting measures to pay federal obligations within the statutory limit since January, and once the tax and spending bill is signed into law, it is expected that the Treasury will increase the issuance of U.S. debt to replenish its cash reserves [3] - Yellen indicates that the debt management process is systematic but will consider unexpected circumstances, particularly in light of the two-year Treasury yield suggesting high overnight rates [3] - The next quarterly refinancing operation is scheduled for July 30, which typically announces adjustments to the issuance strategy [3]

Core Viewpoint - The U.S. Treasury Secretary, Becerra, indicated that the two-year U.S. Treasury yield signals that the Federal Reserve should consider lowering interest rates, as it has fallen below the federal funds rate [1][4]. Group 1: Treasury Secretary's Statements - Becerra's comments align with President Trump's criticism of the Fed for not lowering rates this year, suggesting that declining energy and other prices justify a rate cut [2]. - Becerra has previously stated he would refrain from commenting on the Fed's rate policy, yet he now suggests a need for consideration of rate cuts [5]. Group 2: Market Reactions and Predictions - The market reacted to Becerra's comments with skepticism, as the two-year Treasury yield increased by 10 basis points to 3.7%, indicating a lack of confidence in the call for a rate cut [3]. - Financial market participants generally expect the Fed to maintain interest rates, given that inflation remains above the 2% target and recent tariffs imposed by Trump are likely to exert upward pressure on prices [3][5]. Group 3: Economic Implications - Timiraos noted that the two-year Treasury yield has been below the Fed's short-term policy rate for most of 2023 and 2024, reflecting two investor expectations: a "soft landing" for the economy or a recession leading to a drop in inflation and subsequent rate cuts [5]. - Concerns were raised about the potential for the Fed to lower rates too quickly, which could exacerbate persistent inflation risks [6][7].