2017.12.1323:24:00UTC+00Short-dated Yield Post Steep Decline after Fed Rate Decision

Prices of U.S. government bonds rallied on Wednesday, driving yields lower after the U.S. consumer core inflation figures came in line with expectations. However, the Federal Reserve outlook on 2018 policy came into question, with a lack of change to its weak inflation view.

In a widely-expected move, the Fed raised the benchmark federal funds-rate for the third time this year but stuck to its rate hike projections for 2018.

The two-year note yield, the most reactive to interest-rate policy, declined 4.3 basis points to 1.786 percent, marking the biggest one-day decline since November 22. The yield on the 10-year Treasury note edged down by 5 basis points to 2.353 percent. Yield on the benchmark note was higher earlier in the trading session. The yield on the long bond or the 30-year bond fell 4.5 basis points to 2.738 percent.

The Federal Open Market Committee decided to lift short-term interest rates by a quarter of a percentage point to a range of 1.25 percent and 1.5 percent, marking the fifth time the U.S. central bank raised rates since Chairwoman Janet Yellen's central bank began its monetary policy tightening cycle from near zero at the end of 2015.