The FED maintains interest rates
Yesterday, the Federal Reserve (FED) left interest rates unchanged at 4.25-4.50%, as widely expected.
From the Fed’s statement and Jerome Powell’s press conference, there was little indication of the future path of rates.
The word “uncertainty” was mentioned 16 times during the press conference, highlighting Powell’s cautious stance, which provides a solid basis for taking a wait-and-see approach until the full impact of Trump’s new economic policies becomes clearer.
The Fed’s forecasts have been revised downwards:
- The GDP projection for 2025 was lowered from 2.1% to 1.7%.
- The inflation projection for 2025 was raised from 2.5% to 2.7%.
Interest rate forecasts continue to anticipate two cuts in 2025. The decline in growth expectations and the increase in inflation expectations offset each other with respect to the forecast for the future path of interest rates.
Moreover, the pace of government bond portfolio reduction has slowed: unreinvested monthly Treasury redemptions decreased from $25 billion to $5 billion, while agency asset-backed securities remain at $35 billion.
Powell emphasized that the Fed is in no rush to lower rates, implicitly suggesting that we are still within a rate-cutting cycle.
He also supported the Trump administration’s view that tariffs would cause a temporary spike in inflation but would not lead to structural increases in inflation.
This stance reignited debate among journalists, recalling similar claims about “transitory inflation” made in 2021 before inflation soared. Indeed, it is true, however, that tariffs, in the long run, are more likely to act as a brake on economic growth than to cause a structural increase in inflation.
The Savings Portfolio USD remains at 4%
The Fed’s lack of interest rate cuts is good news for our dollar-denominated savings portfolio, whose yield remains at 4%.
The 4% yield in dollars remains a historically very attractive and very competitive yield compared to interest on deposits and interest-bearing accounts, even for the dollar.
Since we launched the Savings Portfolio USD, the cumulative return is 10.6%, which is 6.7 percentage points higher than the cumulative return on one-year dollar deposits (according to the FDIC), which have accumulated 3.9%.
Our Dollar Savings Portfolio remains the best option for maintaining an emergency fund if your primary currency is the dollar. However, if you’re exposed to the euro, the Savings Portfolio EUR is better for you to avoid currency risk.
A portfolio for every horizon, objective or profile
For investors who prefer to lock in a specific return for a longer period (and who are willing to accept a little more risk), we remind you that we have a full range of Target Portfolios and Bond portfolios (in both euros and dollars) that allow for extended exposure to longer maturities/durations.
If your horizon is longer, our index fund portfolios may be more suitable for you, and for your retirement, our pension plan portfolios may be more suitable.
