Investors weigh the Fed’s interest rate policy outlook

U.S. Treasury yields edged lower on Thursday as investors digested the Federal Reserve’s latest policy decision and considered the central bank’s policy guidance.

At 5:25 am ET, the 10-year Treasury yield was trading at 3.4734% after falling more than two basis points. The 2-year Treasury yield fell below two basis points to 3.963%.

Yields and prices have an inverse relationship and one basis point is equal to 0.01%.

Investors weighed the latest Federal Reserve interest rate news after the central bank announced it would raise rates by 25 basis points on Wednesday. It marked the ninth consecutive interest rate hike and was in line with expectations.

During a news conference following the meeting, he noted that the central bank’s battle to bring inflation down to 2% “has a long way to go and will be bumpy.” He also suggested that a rate cut is unlikely until 2023.

However, a pause in rate hikes may be on the horizon, with a statement released by the central bank accompanying the rate announcement, indicating that policy decisions will continue to be data-driven.

The change in tone came from comments by central bank officials earlier this month, which showed higher-than-expected interest rates. That led many investors to expect a 50 basis point rate hike, but they adjusted their expectations after recent turmoil in the banking sector raised concerns about the stability of the financial system.

Powell noted that those fears played a role in the Fed’s policy decision.

Elsewhere, the Swiss National Bank announced a 50 basis point hike on Thursday and the Bank of England is expected to release its latest policy decision later in the day.

On the data front, the latest preliminary weekly jobless claims report and final building permit figures and new home sales data for February are due Thursday.