US Treasury yields were relatively flat on Thursday as investors absorbed the Federal Reserve’s latest interest rate decision.
At 3:30 a.m. ET, the 10-year Treasury yield had decreased by four basis points, reaching 4.5143%, while the 2-year yield saw a slight dip of one basis point to 4.2155%.
Treasury yields and prices move inversely, with one basis point equaling 0.01%. Other Treasury maturities also showed minimal changes in their yields, with short-term bills like the 1-month, 3-month, and 6-month Treasury notes all seeing slight increases, while longer-term bonds, such as the 30-year Treasury, saw slight declines.
On Wednesday, the Federal Reserve’s Federal Open Market Committee (FOMC) decided to keep its overnight borrowing rate unchanged, maintaining a range of 4.25% to 4.5%. This move came as expected after a series of rate cuts in late 2024. In its statement, the Fed noted that inflation remains somewhat elevated but that the labor market continues to show strength with a stable low unemployment rate.
The Fed emphasized that it needs to see “real progress on inflation or some weakness in the labor market” before adjusting rates further. This cautious stance reflects the central bank’s ongoing assessment of economic conditions and the balance it seeks to strike between curbing inflation and supporting growth. The markets had already priced in a near certainty that rates would stay steady, and there are no immediate expectations for a rate cut before June 2025.
At his post-meeting press conference, Fed Chair Jerome Powell addressed questions about the Fed’s future actions, particularly dismissing external pressures, including those from former President Donald Trump, who had called for immediate rate cuts. Powell stated he had “no contact” with Trump since the comments were made and emphasized that the Fed’s actions would be based solely on economic data rather than political pressures.
Looking ahead, investors are awaiting additional economic indicators, including Thursday’s GDP data for Q4 and weekly jobless claims. They will also be closely watching the release of the personal consumption expenditures (PCE) price index on Friday, as this is the Fed’s preferred measure of inflation.
Despite the Fed’s decision to hold rates steady for now, the future trajectory of interest rates remains uncertain. Elevated inflation and a solid labor market suggest that any cuts in 2025 could be gradual. However, should inflation pressures ease significantly, more aggressive cuts may be considered later in the year.
The Fed’s next policy decision is set for March 19, and while another rate cut seems unlikely at that time, the central bank’s approach will be heavily influenced by the inflation data and labor market conditions in the coming months.
The Washington Post, the Financial Times, CNBC, and Forbes contributed to this report.
