The US 10-year Treasury note yield rose to its highest in 14 months on Thursday as investors expect higher inflation as the economic recovery in that country gathers steam.

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The yield on the benchmark 10-year Treasury bonds hit 1.71 percent, its highest in almost 14 months.

The move comes after the US Federal Reserve lifted the inflation and growth forecasts but reiterated its commitment to keep the benchmark interest rates low until at least 2024.

The Fed expected inflation to jump to 2.4 percent this year, above its 2 percent target. However, Fed chair Jerome Powell said that it was viewed as a temporary surge that would not change the Fed’s pledge to keep its benchmark overnight interest rate near zero.

When inflation expectations rise, bond prices fall as they become less desirable. This pushes up their yield.

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Fed sees higher growth, above target inflation this year, rates remain steady

Further, at this meet, more members of the Federal Open Market Committee indicated that they expected an increase in interest rates in 2022 or 2023, than as many did at the December meeting. However, the median expectation was still for no increase in rates, reports said.

Moreover, the central bank also raised the growth forecast for the world’s largest economy as US President Joe Biden’s $1.9 trillion economic stimulus and a swift rollout of vaccines boosted the outlook. The Fed said it expects the economy to recover quicker than expected.

The US central bank now sees the economy growing 6.5 percent this year, and the unemployment rate falling to 4.5 percent by year’s end, compared to growth of 4.5 percent and unemployment of 5 percent projected at its December policy meeting.

Also Read: Fed maintains easy monetary policy; keeps interest rates near zero

Treasury bonds are considered to be the safest investment. When the economy is growing, investors shift their focus towards risky assets. This triggers a selloff in bonds, analysts said.

The Fed meet outcome suggests little room for tinkering with interest rates now as well as the option for tapering remains active, investors seem to have developed an appetite for risky assets are moving out of bonds.