The Federal Reserve today kept its federal funds target rate unchanged at 1%, its lowest level since 1962, and said it would keep rates steady "for a considerable period."
"It's a good-news scenario for stocks," said Luke D. Knecht, managing director at fixed income manager Deerfield Capital Management. "I don't think it's a good scenario for bonds unless the economy slows down. Bonds are going to be under pressure; as signs of economic growth emerge, there will be the specter of the Fed raising rates to cope with an anticipation of inflation."
The Fed also shifted its view on a decline in prices, he said. Now the chance of deflation appears almost equal to a rise in inflation, he added.