The Federal Reserve Board today kept short-term interest rates unchanged at 1%. The Fed indicated that while the labor market appears to be stabilizing, the risks of disinflation still slightly exceed the risks of inflation. As a result, the Fed noted that an accommodative credit policy can be maintained "for a considerable period."
Casey Colton, portfolio manager of the $2 billion American Century Ginnie Mae Fund, said that could mean the Fed won't raise interest rates until at least early 2004, and possibly even longer. That would be good news for the fixed income markets, he said. "That the words ‘considerable period' were still in there … is a little bit of relief compared to some of the fears that had been building in the last few days."
Stan Mavromates, deputy chief investment officer of the $30 billion Massachusetts Pension Reserves Investment Management Board, Boston, said the pension fund has actually been lowering its fixed-income exposure in recent months.