Diesel prices fuel uncertainty for small businesses

The national average for a gallon of diesel fuel now sits at $5.53, compared to $3.57 a year ago. That single number is the most concrete signal yet that the war in Iran is beginning to press on small businesses in the United States, even as the broader economy shows a strange resilience. In this episode of Marketplace, Kai Ryssdal and his reporters walk through what the bond market is saying, why tomato prices are up 22 percent year over year, how China has leapfrogged U.S. export controls on AI, and what a veterinarian supply company in Missouri and a cotton farmer in Georgia have in common: the war is changing their costs, and they are only beginning to figure out what to do about it.

What the bond market is telling us

The bond market is sending a layered signal about the war and the economy. Short-term Treasury yields, which mature in two years or less, suggest traders believe the Federal Reserve is very likely on hold through this year and perhaps next. Chris Lowe, chief economist at FHN Financial, explains that short-term yields are basically in line with the federal funds rate, meaning investors do not expect the Fed to cut rates until inflation is "materially lower" than it is now.