USNews: “5 Fixed-Income ETFs for Today’s Fed Interest Rate Policy”
After two interest rate cuts in the second half of 2024, the Federal Reserve announced at the first Federal Open Market Committee meeting in 2025 that it would pause rate cuts and keep the benchmark rate at 4.25% to 4.5%.
At the last FOMC meeting, the Fed stated its intention to move the fed funds rate target down to neutral territory (where it neither stimulates nor restrains economic growth), but it said it is in no rush to do so.
After two interest rate cuts in the second half of 2024, the Federal Reserve announced at the first Federal Open Market Committee meeting in 2025 that it would pause rate cuts and keep the benchmark rate at 4.25% to 4.5%.
At the last FOMC meeting, the Fed stated its intention to move the fed funds rate target down to neutral territory (where it neither stimulates nor restrains economic growth), but it said it is in no rush to do so.
Also, given the uncertainty in the economy – especially with President Donald Trump imposing and raising tariffs on certain countries – it is hard to predict what the Fed will do next and when.
The uncertainty arising from the new Trump presidency and the Fed interest rate outlook is making investors cautious, with many seeking safety and stability in their portfolios.
One example of this is that bond investors will prefer the safety (lower risk of default), liquidity (higher demand, especially by institutional investors) and lower volatility (less affected by interest rate fluctuations) of shorter-term fixed-income securities to the higher risk, lower liquidity and higher volatility of long-term notes or bonds.