Treasuries fell after the Federal Reserve lifted its key interest rate for the second time this year and said it is committed to raising rates at a "measured" pace. The Federal Open Markets Committee, the Treasury's policy-making arm, raised the benchmark federal funds to 1.50%, and said an economic slump may be temporary. Traders are now convinced that there's a 50% chance that the Fed will refrain from hiking rates again in September. Rising rates is a sign of a strengthening economy, though softer-than-expected data, including sluggish labor data and a drop in consumer spending, had many economists worried that the recovery was running out of steam -- but the Fed dismissed this idea, saying the economy is still expanding.
The Fed had held the federal funds rate at 1 percent, the lowest since 1958, for a year until June to spark borrowing and keep inflation from slowing too much as to damage the economy. The Fed's next meeting is scheduled for Sept. 21, followed by Nov. 10 and Dec. 14.
However, energy prices, at record highs, could cut into the recovery. Crude oil futures prices this week reached $44.77 a barrel.