FX.co ★ US 10-Year Yield Extends Fall on Dovish Fed View

The yield on the US 10-year Treasury has decreased to approximately 4.12%, marking its second straight day of declines. This follows the Federal Reserve's implementation of its third quarter-point rate cut for the year, an action that was widely anticipated by the market. In a notable adjustment, the Fed has adopted a less aggressive stance than expected, with Chair Jerome Powell indicating that an additional rate hike is unlikely. This has led traders to anticipate two more cuts by 2026. However, the Fed's dot plot suggests just one more 25-basis-point reduction next year. Additionally, the central bank announced it will begin purchasing short-term Treasury bills starting December 12 to boost market liquidity, beginning with a tranche of around $40 billion. On the economic forecast front, the Fed now predicts a 2.3% growth rate for 2026, an increase from the previous 1.8% forecast in September, and a 2% growth rate for 2027, slightly higher than earlier estimates. Inflation projections have been revised downward to 2.5% for 2025 and 2.4% for 2026, remaining slightly above the target of 2%.