Jerome Powell

Bank reserves fell by about $21 billion to $2,999.7 trillion in the week through Sept. 24, according to Fed data released on Thursday. That's the lowest level since the week through Jan. 1.

Most economists say the solution lies in borrowing less, via some combination of lower spending and higher taxes — rather than leaning on the Fed to make borrowing cheaper.

Traders boosted wagers on a quarter-point cut next month, pricing in a roughly 85% chance of a move, up from around 65% before Powell spoke.

Traders were watching a slew of data on a bigger-than-expected increased in jobless claims and expanded manufacturing Thursday.

In minutes from the Fed's July meeting, officials highlighted the risks of inflation outweighing concerns over the labor market, which investors overlooked.

Hopes that the U.S. will reach other trade deals ahead of its self-imposed Aug. 1 deadline are mounting.

U.S. assets whipsawed Wednesday by reports Trump was preparing to fire Powell, with shorter tenors rallying on the prospect that could lead to faster interest-rate cuts.

The recent rally was driven by economic data that reinforced wagers on at least two rate cuts this year, as well as speculation President Donald Trump will name a more dovish successor to Jerome Powell.

Yields across maturities declined, with those on two-year notes falling five basis points and most reaching the lowest level in more than a month.

Some allies of the president have pushed for Treasury Secretary Scott Bessent to get the job, according to people familiar with the matter, a notion that a senior administration official disputed.