The Federal Reserve Board today cut short-term interest rates by 25 basis points to 1%, its lowest level since 1958. The central bank continued to express concerns that falling prices will exceed inflation expectations in coming months.
"Until we see stronger numbers on the economy, we're likely to be in a sideways range," said Jeremy Fletcher, fixed-income portfolio manager at American Century Investments, noting that stocks and bonds that were rallying in expectation of the Fed's move have since sold off. The Fed may still cut up to 50 basis points in the future if the economy doesn't pick up, he added.
Ehsan Rahman, CIO of the Washington Metropolitan Area Transit Authority's $400 million Salaried Retirement Plan, said the plan is hurting because of declining investment income from its fixed-income portfolio. "We are still generating enough income to pay our bills, but unless equities pick up to balance (the drop in interest rates), all the public funds like us are going to be in a fix," he said.