Treasury slashes interest rates on savings bonds.(Knight Ridder Newspapers)

Low inflation and a series of interest-rate cuts hit home Tuesday for millions of Americans who buy the Buick of conservative investment vehicles, U.S. savings bonds.

The Treasury Department slashed rates on the well-known EE bond by more than a point, to 4.5 percent from 5.54 percent. It also trimmed rates on the newer inflation-adjusted bonds to 5.92 percent, down from 6.49 percent. The Treasury adjusts savings bonds rates twice a year, on May 1 and Nov. 1.

Tuesday's rate cuts were predictable given that inflation remains low and the Federal Reserve has cut interest rates four times since Nov. 1. EE rates plunged because they're pegged to rates on five-year Treasury bills, which have slipped since November.

But the severity of the cut on the inflation-adjusted I bond caught some experts off guard. I bonds consist of two components: a fixed rate that lasts the life of the bond and a rate that adjusts every six months in relation to the consumer price index.

Starting Tuesday, investors who buy I bonds will lock in a base rate of just 3 percent, down from 3.4 percent, for the life of the 30-year bond. It was the biggest shift since the bonds were introduced in September 1998.

"It's disappointing," said Daniel J. Pederson, author of "Savings Bonds: When to Hold, When to Fold and Everything In-Between." "Three percent is still decent, but they took some of the frosting off the ...