Will the Federal Reserve cut rates in October? BNP Paribas Chief U.S. Economist James Egelhof discusses the meeting and Chair Jerome Powell's press conference.

Federal Reserve Vice Chair Philip Jefferson said despite the near term cloudiness to economic projections, he does expect inflation to resume its downward trajectory next year and reach the Fed's 2% inflation target in the coming years.

Seven filings were submitted in response to President Donald Trump's request for the Supreme Court to remove barriers from ousting Federal Reserve Gov. Lisa Cook before litigation proceeds. Most filings argued for the Court to deny the president's application.

Federal Reserve Bank of Kansas City President Jeff Schmid said that the central bank should continue its focus on curbing inflation, as the job market is "largely in balance."

Secondary selling pressure and the larger calendar weighed on the market Tuesday.

By the close, muni yields were bumped up to four basis points, depending on the curve, while UST yields rose two to five basis points.

The White House said it will appeal a circuit court ruling allowing Federal Reserve Gov. Lisa Cook to remain on the central bank board while her lawsuit challenging her dismissal is litigated.

Despite the expected rate cut, analysts will be watching the Federal Open Market Committee's actions for other reasons.

Investors added $2.183 billion to municipal bond mutual funds in the week ended Wednesday, following $623.3 million of inflows the prior week, according to LSEG Lipper data.

The White House has appealed a D.C. District Court ruling allowing Federal Reserve Gov. Lisa Cook to remain on the Fed board pending the outcome of her challenge to President Trump's moves to fire her.

October is looking to be another blockbuster month for supply, with several $1 billion-plus deals on the shadow calendar, said Pat Luby, head of municipal strategy at CreditSights. 

The Senate Banking Committee voted 13-11 to favorably recommend Stephen Miran's nomination for the Federal Reserve Board to the full Senate.

Monday's rally is a "continuation of what we are seeing," as the market is actively repositioning where it needs to go, said Alice Cheng, director of municipal credit and investor strategy at Janney.

Muni yields were bumped two to 12 basis points, depending on the scale, with the largest gains out long, and UST yields fell six to nine basis points, pushing the two-year UST to its lowest levels in over two years.

The rally stemmed from the weak nonfarm payrolls report and revisions brought down the three-month average to 29,000 jobs per month, further solidifying the chance of a rate cut in September, said Chris Brigati, managing director and CIO at SWBC.

Stephen Miran will take unpaid leave from and might seek to return to President Trump's Council of Economic Advisers, he said, raising conflict of interest questions in his nomination hearing for a seat on the Federal Reserve Board.

The Justice Department has opened a criminal investigation into Federal Reserve Gov. Lisa Cook and allegations of mortgage fraud, allegations that spurred President Trump to terminate her position on the Fed Board last week. Cook is challenging the president's authority to remove her in court.

Federal Reserve Gov. Lisa Cook filed a lawsuit in federal court Thursday morning seeking an injunction against President Trump's "illegal attempt" to remove her from the Fed board. The suit claims Trump has not demonstrated "cause" for her removal under the Fed statute.

President Trump posted a letter on social media addressed to Federal Reserve Gov. Lisa Cook, informing her that he was terminating her due to allegations of mortgage fraud. The move is likely to tee up an unprecedented legal fight over the Fed's independence.

Munis underperformed a UST rally, which had everything to do with Powell's speech at the Jackson Hole symposium and future Fed action, said Cooper Howard, a fixed income strategist at Charles Schwab.