Chart of the week

Fed doubles down on its tools to keep rates low

Get more insight into the Fed’s expanding commitment to keeping short-term interest rates low and what that may mean for income investors.

March 1, 2019 | 1 minute read
Rate hike cycle start and end points
  • Equity markets cheered the Fed’s inaction at its January meeting, when policymakers maintained the target federal funds rate and went to great lengths to emphasize that they will be patient regarding any future rate moves.1
  • This week, Fed Chair Jerome Powell took the Fed’s statement a step further, noting to Congress that policymakers should be in a position “to stop [balance sheet] runoff later this year.”2
  • In other words, the Fed is actively attempting to avoid a policy overtightening both by taking an extended break from its rate hike policies and by maintaining the current size of its significant balance sheet holdings for the foreseeable future.
  • The current rate hike cycle is already the longest and slowest of any the Fed has enacted in the past 30 years. As the chart highlights, it also features the lowest rates by far, both at the start of the rate hike cycle and likely at its end.3
  • Against this backdrop, the yield on the 10-year U.S. Treasury note remains below 2.75% and near the lower end of its trading range since November 2018.4 With the Fed appearing to double down on its commitment to keeping short-term rates low this week, investors may need to look beyond traditional fixed income investments as they search for income.

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