(Bloomberg) -- Bond investors will look for Federal Reserve Chair Jerome Powell’s Wednesday remarks to keep up the momentum behind a rally in the $29 trillion Treasury market.

US government debt has returned 2.4% so far this year, pushing yields to their 2025 lows as the equity market sold off and President Donald Trump’s tariff agenda drew reprisals from trade partners — which led to forecasts for less economic growth and a resurgence of inflation.

While Powell said “the economy’s fine” two weeks ago, traders will scrutinize his comments — after the Fed wraps up its two-day March meeting — and officials’ revised forecasts, known as the dot-plot, for cracks in that view.

“The rates market is willing and able to reassess the outlook very rapidly,” said Ed Al-Hussainy, rates strategist at Columbia Threadneedle Investment. “Not a lot of data has changed between December and today, but what has changed is the range of outcomes.”

While markets imply essentially no chance the Fed lowers interest rates this month, uncertainty has been increasing about the rest of the year. Traders were pricing in about two quarter-point rate reductions by the end of 2025 as of Tuesday’s close, down from about three a week ago.

Taken together, moves in the short-term futures and options markets appear to show more hedging by traders who see the possibility that the Fed keeps rates on hold for at least the first half.

“A lot of rethinking is going on” on the part of active investors, Mark Howard, senior multi-strategy analyst at BNP Paribas, said. “There is a lot of scrutiny on the leading indicators of future data, as the Fed is data dependent.” BNP Paribas economists expect no further Fed moves in 2025. Howard’s view is that “tariffs and trade policy will create an inflationary impulse that will make it difficult for the Fed to cut rates” this year.

The two-year Treasury note’s yield, more sensitive than longer maturities to changes in expectations for US monetary policy, reached its lowest level of the year, 3.83%, on March 11. The last stage of its decline from 4.42% in mid-January was driven in part by White House comments that seemed to accept a growth slowdown as a short-term consequence of its deep spending cuts. The S&P 500 index went into a correction, and gold reached record highs.

Most recently, though, the stock and bond markets have stabilized. On Wednesday ahead of the Fed’s announcement, the two-year yield was up three basis points to 4.07%.

“We’re nowhere near pricing in any kind of detox — and the word for that is a recession,” Al-Hussainy said, referring to comments last month by Treasury Secretary Scott Bessent. Bessent said Tuesday that the underlying economy is healthy, with no reason for a recession.

Most economists expect the Fed’s revised quarterly forecasts to still show a median expectation of two rate cuts this year, given that inflation still exceeds its 2% long-term target and the job market remains healthy. The central bank’s economic projections are viewed as likely to show a tempered growth outlook while anticipating sticky inflation, however.

What Bloomberg Strategists are saying:

“The rampant policy and economic uncertainty makes any Fed projection or guidance less than fully reliable. While it feels like a lot of the big banks are looking for the 2025 dot to retain guidance for two interest-rate cuts, expectations are kind of all over the shop. That there are several different responses for where the Fed will project rates to be in nine months is kind of a testament to how opaque the outlook is.”

— Cameron Crise, Markets Live Macro Strategist

“We are eager for the summary of economic projections, which may offer a view into the Fed’s thinking or where their concerns lie,” said Christian Hoffmann, portfolio manager at Thornburg Investment Management. “The markets are concerned about the future: how policies, which seem to evolve both daily and intraday, will impact inflation, geopolitical trade, and geopolitical relationships.”

The December dot-plot was less dovish than investors expected as the median forecast dropped to two expected 2025 rate cuts from four in September. Most Fed-watchers predicted three. While most see no change in the median this time, Andrew Hollenhorst, chief US economist at Citigroup Inc., expects it will imply three quarter-point cuts this year. Citigroup’s forecast is for five quarter-point cuts.

Mike Sanders, head of fixed income at Madison Investments, which manages about $28 billion in assets, said he hopes Powell will clarify “at what point does it get painful enough for the Fed to react to slower growth, more unemployment and focus less on inflation.”

“The bond market’s kind of front-run a little bit of the slower growth, so to actually have rates power lower, you have to see hard data come through, with things like the unemployment rate ticking up.”

--With assistance from Kristine Aquino.

(Adds latest moves in yields.)