Fed Cut 175 Basis Points, but Long-Term Rates Went Their Own Way

Federal Reserve Vice Chair Jefferson supported FOMC decisions to lower the target range by 175 basis points since the middle of 2024. Federal Reserve A basis point is one-hundredth of a point, so that cut totals 1.75 percentage points.

The remarks were published on Feb. 6, 2026. The total covers policy action from mid-2024 forward.

That easing came after a period when policy moved the other way. In October 2018, officials viewed a strong economy as justifying rate rises. The Wall Street Journal

When rates rose, transmission to money markets was complete. Increases in the target range fully passed through to other overnight rates, the rates for borrowing for one day. Federal Reserve That finding was reported on June 29, 2023.

Longer-term and riskier rates told a separate story. Spreads on risky 'high yield' debt, the extra return investors demand for default risk, reached 3.81 percentage points, the highest since last November. The Wall Street Journal That level was reported on Aug. 9, 2024. The benchmark 10-year Treasury yield, the yearly return for lending to the U.S. government for ten years, settled at 2.688%, up from 2.652% the prior Wednesday. The Wall Street Journal

The broader context here is the gap between overnight plumbing and market pricing for time and risk. Pass-through to overnight rates can be mechanical when arbitrage ties funding markets to the target range and administered facilities. Term yields and high-yield spreads reflect extra compensation for growth expectations, default risk and supply. A 175-basis-point cut resets the overnight anchor. It does not by itself set the long end or lower-rated credit.

In my view, the sequence matters for short-term funding. Full pass-through on the way up supports the working assumption that cuts also pass through to overnight secured and unsecured rates. That keeps cash, repo and short-dated instruments closely tied to Committee action. The snapshots of 3.81 percentage points for 'high yield' spreads and 2.688% for the 10-year yield show the other channel. Financial conditions for borrowers and portfolios can diverge from the policy range when spreads widen or term yields rise.

Looking at what this means for risk management, the shift from strength-justified rises in 2018 to 175 basis points of easing since mid-2024 changes carry, roll and refinancing math. Lower overnight anchors cut front-end funding costs if pass-through stays symmetric. Wider credit compensation offsets that help for lower-rated issuers. Duration exposure stays tied more to the policy path and term compensation. Transmission was tight. Pricing was not uniform.