Treasury yields climbed Wednesday after February’s softer-than-expected inflation readings eased fears of an imminent economic slowdown. The 10-year Treasury yield rose about 4 basis points to 4.328%, while the 2-year yield increased more than 5 basis points to roughly 3.999%.
The Consumer Price Index for February showed a monthly rise of 0.2% and a year-over-year increase of 2.8%, both slightly below economists’ projections of 0.3% monthly and 2.9% annually. Core CPI, which excludes volatile food and energy prices, also printed cooler-than-anticipated figures at 0.2% for the month and a 3.1% annual rate. Those softer inflation readings tempered immediate concerns about stagflation as markets weighed other risks such as tariffs.
Goldman Sachs analyst Kay Haigh said the Federal Reserve is likely to hold the policy rate in the 4.25%–4.50% range at its upcoming meeting. However, as inflation continues to ease and downside growth risks grow, the bank expects the Fed may begin cutting rates later in the year. Investors remain attentive to trade policy developments that could affect the outlook, including existing U.S. tariffs on steel and aluminum, European countermeasures targeting about $28 billion in U.S. goods, and the suspended proposal to double certain Canadian import duties.
Market participants noted that the combination of cooling inflation and persistent growth uncertainty has increased sensitivity to policy signals from central bankers as well as to geopolitical and trade-related headlines. Treasury yield moves reflected that balance: longer-dated yields inched higher on signs growth concerns remain, while shorter-term yields rose amid evolving expectations for the path of monetary policy.
Analysts cautioned that while one month of softer inflation data can influence near-term sentiment, trends over several months will better determine whether inflation has sustainably returned to the Fed’s target. Until then, investors are likely to focus on incoming economic data, central bank communications and developments in trade policy when pricing risk and interest-rate expectations.