Treasury yields fall in volatile trading after the Fed signals a potential policy change

Treasury yields dipped Wednesday as the Federal Reserve approved a widely expected 75 basis point interest rate hike and signaled a possible slowdown in the pace of increases.

The yield on the 10-year Treasury last traded 2 basis points lower at 4.04% after falling below 4% earlier. The policy-sensitive 2-year Treasury yield last traded flat at 4.54%

Yields and prices have an inverted relationship, with one basis point equaling 0.01%.

The Fed on Wednesday approved a fourth consecutive three-quarter point interest rate increase, taking its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.

Meanwhile, the new statement hinted at a possible policy change, saying the Fed "will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

Fed Chairman Jerome Powell said in a press conference that terminal rate will still be higher than anticipated.

"We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected," Powell said.

Powell added that the time to slow down tightening may come as soon as the next meeting or the one after that.