TREASURIES-US yield curve hits steepest in more than two years as more cuts underway

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Fed forecasts show addition 50 bps easing this year

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Fed wants to show it is in control -fund manager

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Fed Chair Powell says will go fast or slow as appropriate

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By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 18 (Reuters) - The U.S. Treasury yield curve on Wednesday reached its steepest level since July 2022, after the Federal Reserve cut interest rates by 50 basis points (bps), a larger-than-usual rate reduction as the central bank grappled with a weakening labor market.

The widely-tracked spread between U.S. two- and 10-year yields hit as wide as 10.2 bps and was last at 8.6 bps . A steeper curve suggests more easing is on the way.

The Fed said it has gained greater confidence that inflation is moving sustainably toward its 2% goal and that the risks between prices and employment are roughly in balance.

Prior to the rate outcome, the rate futures had been expecting a 50-bp cut, even as a majority of Wall Street economists were anticipating a 25-bp move.

"It seems to me that they want to really show that they are that they're relevant and that they are kind of in control. They certainly have room to do that because there's still a lot more room to cut rates after this," said Thomas Martin, senior portfolio manager, Globalt Investments in Atlanta.

"They're cutting when the economy is still showing signs of a fair amount of strength. And it's most likely because the inflation fight is seems to be in the bag."

The U.S. central bank's forecast, or the so-called "dots" showed rates going down to 4.375% by the end of 2024, which suggested about an additional 50-bp of easing this year. The year-end forecast for 2025 showed additional cuts of 100 bps, and a final 50 bps in 2026 to end in a 2.75%-3.00% range.

In a press conference, Fed Chair Jerome Powell noted that the central bank is no rush to cut rates, adding that the Fed will move as fast or as low as it thinks appropriate.

U.S. Treasury yields pared gains overall in choppy trading, after the Fed decision.

The benchmark 10-year yield rose 4.7 bps to 3.688% , while U.S. 30-year yields increased 6.5 bps to 4.016%.

On the front end of the curve, U.S. two-year yields was little changed at 3.594%. (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Carolina Mandl; Editing by Alistair Bell)