U.S. Treasury yields rose sharply on Wednesday after the Federal Reserve announced its latest interest rate cut, but suggested the rate cut may be smaller.
The rate of return is 10-Year Treasury Bond In afternoon trading, the index rose more than 11 basis points to 4.498%, hovering near the key 4.5% level. this 2-Year Treasury Bond The yield surged more than 10 basis points to 4.346%.
There is a reciprocal relationship between output and price. 1 basis point is equivalent to 0.01%.
The Federal Reserve announced another interest rate cut on Wednesday, by a quarter of a percentage point. Market participants on Wednesday widely expected the move to mark the Fed’s third consecutive rate cut.
However, the central bank also predicts that there will be fewer interest rate cuts in the coming year, with two rate cuts expected, down from the previous four. The Federal Reserve also slightly raised its inflation forecast.
“With today’s action, we have lowered the policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” Powell said at a news conference after Wednesday’s announcement. “So as we consider further adjustments We can be more cautious when it comes to policy rates.”
In fact, the probability of another rate cut at the next policy meeting in January has dropped to less than 10%, according to federal funds futures trading data tracked by the Fed. CME Group FedWatch Tool.
“The Fed has entered a new phase of monetary policy, the pause phase,” said Jack McIntyre, portfolio manager at Brandywine Global. “The longer this goes on, the more likely it is that the market will price hikes and cuts equally. Policy uncertainty will lead to greater financial market volatility in 2025.”
The Fed’s decision follows the European Central Bank’s fourth rate cut of 25 basis points this year last week. The Bank of England is due to announce its own rate decision on Thursday.
About The Author
