Quarterly Letter to Members – December 2022
“We will stay the course until the job is done.” Fed Hawks continue to squawk – inflation is still too high and ongoing rate hikes remain appropriate.
The FOMC raised the benchmark Federal Funds rate this month by 0.50%, settling the target range at 4.25% to 4.50%. This is the highest level in 15 years and marks the seventh consecutive interest rate hike this year.
Fed Chairman Jerome Powell mentioned in his press conference that the Committee still believes that inflation is too high and is currently monitoring the wide range of associated risks. It was noted that when establishing a pace for future rate hikes, the Committee will review cumulative tightening, economic and financial developments, and policy lags.
No meaningful changes were noted in the FOMC statement language, but the most relevant update came from the Summary of Economic Projections (SEP). The median Federal Funds rate forecast for 2023 released was increased to 5.1% from 4.6% back at the September meeting – indicating that the new terminal range is somewhere between 5.00% and 5.25% for 2023. This shows the potential for an additional 0.75% in rate hikes between now and the March 2023 meeting. At this time, it appears there will be a 0.50% hike at the February meeting followed by a 0.25% increase at the March meeting. Powell remained noncommittal during his press conference regarding the size of future rate hikes and noted “decisions will depend on the totality of economic data.”
The Committee is projecting Gross Domestic Product (GDP) will be 0.50% in 2023, which is down from the 1.2% in the September projections. Additionally, GDP is expected to advance by 1.6% in 2024 and 1.8% in 2025. The median unemployment rate is seen rising from 3.7% currently to 4.6% in 2023 and 2024 and decreasing slightly to 4.5% in 2025. Chair Powell was adamant that more work needs to be done to get inflation back in line with their 2% target. Again, he noted the continued imbalance in the labor market and low unemployment as the catalysts for their vigilance and conviction to continue raising interest rates.
In summary, based on Powell’s comments at the December press conference and in conjunction with repeated language from prior FOMC meetings, we believe the Fed will hold interest rates higher for longer until it reaches its goal of reducing inflation back to its desired level of 2%. We anticipate the Fed would not consider reducing rates any time soon, unless or until the employment picture were to suffer and/or the economy were to experience a recession worse than expected.
Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. The information in this letter is based on data obtained from recognized sources and is believed to be reliable. Past performance is not indicative of future results. This material is for AMLIP participants and administrators ONLY and is NOT for public distribution.

INVESTMENTS ARE: NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENT AGENCY

Portfolio Matters

The month opened with a $700,759,312 balance and closed with a balance of $674,609,208. The seven-day effective yield ended the month at 4.12%. The monthly seven-day average effective yield for the month was 3.88%. Average maturity ended the month at 10 days.

At the end of the month, the AMLIP portfolio had 38% of its portfolio assets allocated to overnight investments/cash, corporate securities made up 3% of the assets, commercial paper represented 37%, CDs represented 6%, and Treasury & Agency represented 16%.

 Money Market Comparison
On December 26, 2022, the seven-day compound yield of all taxable money market funds as reported by iMoneyNet, Inc. was 3.96%, the Tier 1 Institutional Compound Yield was 4.33% and the Pool’s 7-day effective rate of 4.13% on the same day. All Pool rates are quoted net of fees and expenses.

  AMLIP Board Members
   Terry Eubank – President
    City of Kenai
   Cheyenne Heindel – Vice President
     Matanuska-Susitna Borough
   Jody Tow – Treasurer
    Petersburg Borough
   Nils Andreassen
    Alaska Municipal League
    Mason Villarma
     City & Borough of Wrangell
    Kris Erchinger
     City of Whittier
    Melissa Haley
     City and Borough of Sitka
    Angie Flick
     City & Borough of Juneau

  AMLIP Membership
Adak, City of Dillingham, City of Nome, City of
Akutan, City of Eagle, City of North Pole, City of
Alaska Association of Eek, City of Northwest Arctic Borough
 Municipal Clerks Egegik, City of Nulato, City of
Alaska Government Finance Elim, City of Old Harbor, City of
 Officers Association (AGFOA) Fairbanks North Star Borough Palmer, City of
Alaska Industrial Development Fairbanks, City of Pelican City School District
 Export Authority (AIDEA) False Pass, City of Pelican, City of
Alaska Municipal League Fort Yukon, City of Petersburg, City of
Alaska Municipal Galena, City of Pilot Station, City of
 Management Association Gustavus, City of Pribilof School District
Aleknagik, City of Haines Borough Quinhagak, City of
Aleutians East Borough Homer, City of Sand Point, City of
AML/JIA Hoonah, City of Selawik, City of
Anchorage Community Huslia, City of Seldovia,City of
 Development Authority Juneau, City and Borough of Seward, City of
Angoon, City of Kake City School District Sitka, City and Borough of
Annette Islands School District Kenai Peninsula Borough Soldotna, City of
Atka, City of Kenai, City of Southwest Alaska Municipal
Atqasuk, City of Ketchikan Gateway Borough Conference
Barrow, City of King Cove, City of St. Paul, City of
Bethel, City of Kodiak Island Borough Tenakee Springs, City of
Brevig Mission, City of Kodiak, City of Toksook Bay
Bristol Bay, Borough of Kotzebue, City of Unalakleet, City of
Chevak, City of Koyuk, City of Unalaska, City of
Chuathbaluk, City of Manokotak, City of Upper Kalskag
Cold Bay, City of Marshall, City of Wasilla, City of
Cordova, City of Matanuska-Susitna Borough Whittier, City of
Delta Junction, City of McGrath, City of Wrangell, City and Borough of
Denali Borough Mekoryuk, City of Yakutat, City and Borough of
Mekoryuk, Village of
New Stuyahok, City of