The Federal Reserve cuts interest rates by 0.25%. The Yield of the Dollar Savings Portfolio at 3.50%

The Federal Reserve cuts rates by 0.25%.

The Federal Reserve decided on a 25 basis point cut, setting the target federal funds rate at 3.75–4%. The U.S. central bank also announced the suspension of quantitative tightening (the reduction of its bond portfolio) starting December 1, in order to avoid draining too much liquidity from the market. These moves were largely anticipated by investors.

What really moved the markets yesterday was Powell’s tone, which was tougher than expected regarding inflation. In particular, regarding the possibility of another cut in December, the Fed Chairman stated that “it is by no means guaranteed” and added: “far from it.”

This clearly pushed bond yields higher; the 2-year Treasury rose 11 basis points, to 3.60%. Stock indices initially fell, then recovered, but bonds remained under pressure.

The FED’s Dilemma: robust consumption versus a slowing labor market

From this level of official rates, we could expect a pause, although Miran, representing the Trump administration’s position within the FED, continues to call for more aggressive cuts. In this meeting, Miran advocated a 50 basis point cut, while the other dissenting voice was Schmid, who wanted to keep rates unchanged.

The divergence of opinions within the FED is growing, and uncertainty is exacerbated by the lack of reliable economic data due to the government shutdown, which has halted many agencies responsible for compiling economic statistics.

The most difficult aspect for the FED to interpret in the current environment is the coexistence of robust private consumption and a slowing labor market. The U.S. economy shows strong growth driven by household spending, while the labor market is creating fewer jobs.

This is undoubtedly the result of significant uncertainty surrounding trade policies, which has led businesses to act more cautiously, as well as the increasing adoption of artificial intelligence applications and robotics, which are causing companies to reduce hiring.

We are facing a structural change in the labor market, for which central banks have very little experience.

Rates currently remain at a slightly restrictive level to respond to inflation, which continues to be above the 2% target (the latest reading places U.S. inflation at 3% year-on-year). In general, the equilibrium level of rates is assumed to be around 3%.

Dollar Savings Portfolio drops to 3.50%

Regarding our portfolios, official rates are particularly relevant for savings portfolios, as they directly reflect the evolution of rates. Consequently, the Yield drops to 3.50% for the Dollar Savings Portfolio* (a reduction of 0.25%).

Important note: for an investor whose financial life is exposed to euros, this implies a currency risk that must be considered.

InbestMe’s savings portfolios remain an ideal option for those seeking a solution for liquidity and an emergency fund. The Yields of our savings portfolios have consistently been a better option than traditional bank deposits, accumulating 13.1%, 8.2% more in dollars than the 4.9% accumulated by one-year bank deposits in this currency.

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

For investors who prefer to lock in a specific return over a longer period, accept slightly more risk, or can commit to a term, we remind you that we offer a full range of target return portfolios and bond portfolios (both in euros and dollars) that allow extending exposure to longer maturities/durations.

These portfolios have now become more attractive due to the latest central bank rate cuts.

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

All of them have generally delivered excellent returns despite the volatile environment of the first half of the year. In line with this, in September 2025 we published that, although expected returns exceed forecasts, it is better to stick with the plan.