It became very evident last week that the Federal Reserve is sending the signal to the markets that interest rates will be going up. We are all feeling the pressures of higher inflation, whether at the grocery store, the gas station, the lumberyard, or the restaurant. The level of inflation is already above the 2.0% to 3.0% limit the Federal Reserve set last year. When you also consider real estate, energy, and other factors, the inflation rate swells to north of 6.0%.
With this being the case, it is my expectation that short-term rates will be raised before year end or in early 2022. That means that now is the time to start preparing a liquidity analysis and have a firm handle on all cash that will be available to be invested by your financial institutions.
Just as you start planning your FY22 budget, you should prepare for rising interest rates. As we’ve said so many times before, the impact of higher-interest earnings can be significant to your entity’s bottom line.
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