The FED and the ECB maintain interest rates. The Euro Savings Portfolio at 1.60% and the Dollar Savings Portfolio at 4%

Rates unchanged.

In their most recent meetings, both the Federal Reserve (FED) and the European Central Bank (ECB) have opted not to change interest rates. In the case of the FED, this is the fifth consecutive meeting without changes. For the ECB, this pause comes after eight consecutive cuts.

After the pandemic, central banks sharply raised rates to curb inflation. Higher rates make financing more expensive for households and businesses, which cools the economy and, in theory, also reduces price pressure.

Given that inflation is approaching the 2% target, central banks are beginning to adjust interest rates to levels that are sustainable in the long term. In Europe, this level is around 2%, while in the U.S. it could be between 3% and 3.5%.

Uncertainty implies waiting

However, uncertainty remains high. In particular, in the United States, rates remain between 4.25% and 4.50%, above the level considered neutral. The FED is resisting lowering them for now, fearing that new import tariffs will push prices upward. Since the labor market remains strong (unemployment is at 4.1%), FED Chair Jerome Powell sees no urgency to cut and prefers to wait and see the impact of these measures.

This stance has been harshly criticized by Donald Trump, who accuses Powell of generating unnecessary extra cost for public debt, since the Treasury has to issue at higher rates than it would if the FED cut them. Trump has even demanded a cut of more than three percentage points.

Although this demand is clearly excessive, Powell acknowledges that current rates are somewhat restrictive, that is, somewhat above what would be necessary. That leaves room for at least a half-point cut.

The clash between Trump and Powell comes at a key moment: the next president of the FED will soon be chosen, as Powell’s term ends in May 2026. Since the choice will depend on the U.S. president, everything suggests that his successor will be more inclined to cut rates.

Today it is much more difficult to predict the evolution of inflation than in the years before the pandemic. There are elements that may contain it, such as the implementation of artificial intelligence in services or robotics in industry. But other factors, such as raw material shortages or trade tensions, push in the opposite direction. That is why central banks prefer to act cautiously and decide based on the most recent data.

The Savings Portfolio remains at 1.60% in Euros and 4% in Dollars

As for our portfolios, official interest rates are especially relevant for savings portfolios, as these directly reflect rate movements, discounting fees. Given the current pause from central banks, the net return (Yield) of our savings portfolios remains unchanged:

• 1.60% for the euro portfolio and
• 4% for the dollar portfolio*.

*Important note: for an investor whose life is exposed to Euros, this implies a currency risk that must be considered.
It is an ideal option for those looking for a solution for their liquidity and emergency fund.

The Yields of our savings portfolios have always remained a better option than traditional deposits:

• accumulating almost 2% more in Euros than bank deposits

• accumulating 7.3% more in Dollars than deposits in this currency

For other goals, other portfolio options: target, bonds, index funds and pension plans

For investors who prefer to fix a specific return for a longer period, who accept slightly more risk or can set a time horizon, we remind you that we have a complete range of target return portfolios and bond portfolios (both in Euros and in Dollars) that allow longer maturity/duration exposure.

These portfolios have now gained more appeal due to the latest ECB cuts.

If your horizon is medium or long term, it is more convenient to consider our index fund portfolios, and for your retirement our pension plan portfolios, as shown in the table above.

All of them have, in general, had excellent returns despite the volatile environment of this first half of the year.