Market Analysis

U.S. Treasury yields decreased on Tuesday as investors considered Federal Reserve Chairman Jerome Powell's comments regarding the economic outlook and future interest rates.

As of 3:04 a.m. ET, the 10-year Treasury yield had dropped by over three basis points to 4.1983%. The 2-year Treasury yield was also down by more than one basis point to 4.4404%.

It's important to note that yields and prices move in opposite directions, and one basis point is equivalent to 0.01%.

On Monday, Powell indicated that the central bank would not wait until inflation reaches its 2% target before reducing interest rates. He explained that delaying rate cuts until the target is met would mean "you've probably waited too long," as the effects of tight monetary policy would still be influencing the economy, potentially driving inflation below 2%.

Powell also mentioned that the Fed is seeking "greater confidence" that inflation will revert to 2%. He noted that recent favorable inflation data has been contributing to this confidence.

Last week, the consumer price index for June unexpectedly showed a 0.1% decrease from the previous month and an annual increase of 3%.

Traders currently expect the Fed to keep rates unchanged at the upcoming meeting later this month. However, CME Group’s FedWatch tool indicates a 100% probability of rate cuts in September.

As the week progresses, several other Fed officials are scheduled to speak. On Tuesday, investors will also be focusing on the latest retail sales data, along with import and export prices.

Paraphrasing text from "CNBC" all rights reserved by the original author.