A Wall Street Journal survey this month of 71 economists from academia, finance, and business showed that economists believe the high bond yields are unlikely to disappear in the short term. About three-quarters of the economists believe the 10-year U.S. Treasury yield will reach or exceed 5% by the end of this year. More than a third expect this yield to remain at 5% or above until 2027. The continued high bond yields reflect the combined effect of several factors, including improved economic growth, inflationary pressures prompting the Federal Reserve to raise interest rates, and market concerns about the U.S. fiscal outlook.
One reason for the expected rise in bond yields is oil prices. Economists expect the U.S. benchmark crude oil price to be around $75 per barrel by the end of 2027, down from $101 at last Friday's close, but higher than the pre-war price of $67 before the Iran-Iraq War. Meanwhile, inflation, as measured by the CPI, is expected to fall to 2.3% by the end of 2027. The economists who participated in the survey submitted their forecasts before the release of the September CPI report.
Economists expect the U.S. economy to add an average of 56,000 jobs per month over the next year. The survey team significantly raised its forecast for the annualized GDP growth rate in the third quarter, adjusted for inflation, from 2% in the July survey to 3.1%.
