None of the rate raises over the course of the past several months have surprised the members of the Board of Managers. The Board expected the 3/4-point raise in June and the second 3/4-point raise last month (July), which brought the prime rate to 5.50%. While 250,000 jobs were expected in July, the jobs market numbers returned a surprising 528,00 jobs. Fuel prices at the pump have been declining for the past few weeks, which has been a welcome reprieve, though food prices continue to rise. The housing market, which has been on fire in many regions, shows signs of abating somewhat. As a result of these mixed indicators, the general consensus is that the Fed will now pause to see what impact rate raises will have on inflation.
The Board has taken all of this into account. Over the past year-plus, we have significantly reduced the risk of interest rates rising by shortening the maturity of our bond portfolio and by increasing our use of high yield investments. Vigilance and judicious flexibility continues.