As expected, in its September meeting yesterday, the Fed paused their steady upswing on interest rates in order to let the data sift through the economy and offer a clearer picture of inflation going forward. Although inflation has come down steadily from January’s 6.4% (and 2022’s 9% inflation rate), there is still caution. Powell noted that we haven’t reached what is considered the ‘sweet spot’ at 2% inflation, so the Fed keeps options open for perhaps one additional quarter point raise before the end of the year.

Because interest rate hikes hit housing immediately, it’s that market that is feeling the pinch most acutely right now, though many with long financial experience and memories remember the double-digit interest rates in the 1980’s. So, while the 5.25% rate, (which amps the mortgage rates to 7+%), reached in June was the highest in sixteen years, it was no surprise to the Board. Many factors play into the ‘soft landing’ the Fed is working to help engineer. Tightened rates but not too tight for too long.

With conversation about ‘when the Fed start easing’ in the wind, the Board continues to keep a close eye on the income portion of the Fund especially to take the best, most prudent advantage of any changes.

There have been judicious course corrections throughout the year-plus in an effort to mitigate the negative impact on the Fund and to take advantage of the increasing returns in the bond markets. (See: Update by the Vice Chair).  Vigilance and judicious flexibility continues.