US Treasury yields retreats

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NEW YORK- US Treasury yields reversed an earlier rise on Wednesday after Federal Reserve Chair Jerome Powell said he expects to see further progress on inflation even as the US central bank removed language from its latest policy meeting statement that had acknowledged easing inflation.

The Fed dropped language saying inflation “has made progress” towards its 2 percent inflation goal, noting only the pace of price increases “remains elevated.”

The change “acknowledges that inflation remains above the Fed’s target and may be leveling off above the target rate,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Pittsburgh.

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Powell told a press conference after the meeting statement that the Fed wants to see further progress on inflation and could see a pathway for that, noting, for example, that shelter inflation is steadily falling.

Powell also said that the Fed doesn’t need inflation to fall to its 2 percent annual target before cutting interest rates.

Traders are pricing in around 46 basis points of cuts by year-end, down from around 48 basis points before the Fed statement. That reflects falling confidence that the US central bank will make two 25 basis point rate reductions this year.

The Fed kept interest rates steady on Wednesday, as was widely expected.

The 2-year note yield, which typically moves in step with Fed interest rate expectations, was last up 2.1 basis points on the day 4.226 percent. It got as high as 4.263 percent after the Fed statement.

Benchmark 10-year yields fell 0.2 basis points to 4.547 percent after earlier reaching 4.593 percent.

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