Yields on short-dated US Treasuries rose after the Federal Reserve lifted interest rates for the first time since 2023 and forecast further action to rein in inflation. Two-year yields climbed to touch 4.73%, the highest since 2024 and more than 10 basis points above the level seen before the meeting. Longer-term Treasuries trailed the move, with the 10-year yield remaining lower on the day at 4.97%.

The hike itself was widely expected, with markets instead taking their cue from quarterly projections in which officials signaled growing support for further tightening. Traders added to bets on another Fed rate increase this year, nearly pricing in three hikes by the middle of 2027.

"Further hikes should clearly be on the Fed's agenda," said Ed Hutchings, head of rates at Aviva Investors. "The outlook for the inflation side of the Fed's mandate must remain a significant and primary source of concern." In his post-meeting press conference, Chairman Kevin Warsh restated his concerns over inflation, saying recent data "do not tell me that underlying trends have meaningfully improved."

"By saying that the hike supports a 'timelier' return to 2% inflation, the FOMC clearly states that there is more to do," said Luigi Buttiglione, chief executive of advisory firm LB Macro. "Likely at least another three hikes are necessary."