Every Quarter Matters

Every Quarter Matters

Each time the Federal Reserve raises interest rates by a quarter of a percent, the higher the value of your cash.

Earlier in the year, I made 10 bold predictions for 2018. My top three predictions were related to increased interest rates. They were:

1.) The Federal Reserve will approve three rate hikes of .25% each to reach a level of 2.00% on Fed fund rates.

2.) The 30-day T-bill rate will break the 2.00% level.

3.) The average bank Earnings Credit Rate (ECR) will break the 1.00% level.

All three predictions have occurred, which means the value of your cash has gone up by .75% or more over the last 10 months. This equates to an additional $7,500 on every $1 million invested or being used to cover banking fees on an annual basis.

It’s anyone’s guess what the Federal Reserve will decide at their next meeting in December. Chairman Powell has indicated that it is his intention to continue on a path of slowly raising short-term interest rates despite mounting political pressure to do otherwise.

At threeplusone we believe very dollar of cash has value in the marketplace. Identifying “all” cash through our proprietary liquidity modeling is what makes our services unique to public entities and higher Ed institutions.

A quarter of a percent rate increase means $2,500 more in earnings per million dollars. That may not sound like much but, as the numbers add up, it could increase your bottom line by tens to hundreds of thousands of dollars per year.

And that can mean a lot to your entity and to those you serve.

A Rate Hike Is Already Baked In

The Federal Reserve’s highly anticipated 25-basis-point rate hike will be announced in the coming weeks. In fact, it’s already been baked into the fixed-income markets.

A Rate Hike Is Already Baked In

Under the helm of Janet Yellen, the Federal Reserve Chair, the Fed’s calculating approach has been to manage expectations well in advance. As a result, given her recent comments and those made by other board members, the next moves will likely mirror the Fed’s actions in 2015.

Once announced, I do expect the short-term fixed income markets to settle down. I also foresee an immediate jump in lending rates with a very small increase in deposit rates.

A Rate Hike Is Already Baked In

At three+one, we are not a bank or investment advisor. Our expertise is determining the time horizon of an entity’s operating and non-operating cash and its value in the marketplace.

Keep in mind that every single dollar that sits idle is a lost opportunity to increase your income. Given the upcoming actions by the Fed, your cash will have greater value in 2017 than it has had over the last 10 years.

Now is the time to have three+one conduct a liquidity analysis so you can maximize the value of each dollar in the coming year.



We Hope to See You at Our Upcoming Presentation:

Northeast GFOA Holiday Seminar – December 13th in Troy, NY