If interest rates are the measure of monetary policy, then we have already seen a strong tightening.

For example, since late March, the yield on the 10-year Treasury note — a critical interest rate since it’s the basis for mortgage rates — has jumped a full percentage point.

That sentence appears right next to a chart showing that the Federal Reserve has kept its interest rate unchanged for the past year. The job of monetary tightening is being undertaken instead by what Wall Street economist Edward Yardeni calls “bond market vigilantes.”

This is hardly the first time that the market has changed monetary policy ahead of the Fed. The central bank had fallen behind a loosening trend back when I wrote Can Greenspan Steer?

For Discussion. What factors account for the rise in long-term interest rates?