Despite the pressure to lower rates, the Federal Reserve, now headed by Kevin Warsh, voted to raise rates a quarter point (.25%) in its September meeting. Hopes are one thing, numbers another. It’s the numbers – the annual inflation rate of 3.4% remains above the Fed’s target 2% – that drove the unanimous decision to raise. In his mildly oblique commentary, despite a stated desire to avoid ‘signaling’ the Fed’s future intention to the market, Warsh nevertheless left the door open to another quarter-point rate hike before year’s end. Which means, in the see-saw relationship of bond prices to yields, the price of bonds will likely decrease a bit (as they did with the September rate increase) as the yields rise, a relationship the Board well understands and works to manage. Even with the shift, the year-to-date gross return for the Fund is 7.88%, 62 bp better than the Policy Benchmark.