Treasury yields traded slightly lower on Wednesday as the Federal Open Market Committee meeting minutes showed officials were ready to hold interest rates steady until further improvement on inflation.
The 10-year Treasury yield dipped less than 1 basis point to 4.535%, while the 2-year Treasury yield pulled back 2.3 down 3 basis points at 4.274%.
One basis point is equivalent to 0.01%, and yields and prices move in opposite directions.
Minutes from the Federal Reserve’s most recent policy meeting showed that central bank officials agreed they would need to see inflation come down more before lowering interest rates further. They also expressed concern about the impact President Donald Trump’s tariffs would have in making that happen.
“Participants indicated that, provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate,” the minutes stated.
On top of the central bank’s focus on employment and inflation, Trump’s plans for fiscal and trade policies have added a wrinkle into the considerations for Fed officials.
“Participants generally pointed to upside risks to the inflation outlook upside risks to the inflation outlook,” the minutes said. “In particular, participants cited the possible effects of potential changes in trade and immigration policy.”
In January, the Fed decided to leave its overnight borrowing rate unchanged in a range of 4.25% to 4.50%, following three straight cuts since September 2024.
Last month, Fed Chair Jerome Powell said the central bank would need to see “real progress on inflation or some weakness in the labor market before we consider making adjustments.”
This was reiterated by Fed Governor Michelle Bowman on Monday, who said that while monetary policy “is now in a good place,” she’d like to see more data showing progress on inflation before cutting rates further.
“I would like to gain greater confidence that progress in lowering inflation will continue as we consider making further adjustments to the target range,” Bowman said in a speech at the American Bankers Association.
Investors also parsed fresh housing data on Wednesday. Building permits inched higher in January while starts declined, the Census Bureau said.
