Bond prices are down modestly this morning, after the shorter-end of the yield curve was took a bit of a hit yesterday after the FOMC statement.Bullish bond traders objected on the grounds that the Fed seemed united in two views: One, any first quarter weakness in the economy is transitory. And two, inflation is roughly at the Fed’s desired target and should remain close to target.That second item is the one to which bond traders reacted more negatively.

The FOMC statement suggests that the Fed is likely to raise rates again at its June meeting. Remember, the Fed is normalizing rates, not tightening. But it’s a long way until June. We’ll get two payroll reports, multiple inflationindicators, and any number of possible surprises from Washington or elsewhere around the globe. Nothing is pre-ordained when it comes to rates.

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Focus On The Health Care Bill

The House might vote on a new health care bill today, and it might pass. If the bill does pass, the markets might not care. Not much is known about the bill, but it’s likely to closely resemble the last bill offered by House Speaker Paul Ryan. If so, it will be D.O.A. in the Senate. Even so, stock traders no longer seem interested in the health care bill as the effort seems to be in place to push on toward tax reform.

Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.