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Fed Policy Boosts Bond Funds in the First Quarter

The Fed's dovish stance contributes to 2019's strong start.

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Heading into 2019, the Federal Open Market Committee (FOMC) adopted a more dovish stance than some market participants had expected. In December, the committee held the federal-funds target rate within the 2.25%-2.50% range after it had previously signaled the likelihood of more increases, and it maintained that position in March. The majority of FOMC members expect rates to remain unchanged the rest of 2019. This was the first quarter without a rate hike since the third quarter of 2017.

In March, the Fed also announced a plan for ending its balance-sheet unwinding process by September 2019, not the end of the year as investors previously expected. This accelerated timeline implies that the Fed will maintain a larger balance sheet than initially signaled, which should provide additional liquidity to the market.

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Zachary Patzik does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.