Stay in short-duration bonds, despite Fed rate cut

RECENT developments point to a likely rate cut in the US Federal Reserve’s September meeting. We believe we are likely to see minimal cuts from here, and the Fed funds rate will remain above pre-pandemic levels.

Short-duration bonds continue to be our top preference.

High possibility of Fed rate cuts

Inflation in the US has declined steadily from its peak, helped by the Fed’s aggressive rate hikes. The central bank’s preferred measure of inflation – the Core Personal Consumer Expenditure Index – has eased to 2.6 per cent year on year, edging closer to the targeted 2 per cent.