Recent Federal Reserve decisions underscore the unusual uncertainty surrounding the direction of interest rates. At its July meeting, the Fed held its federal funds target range at 3.5% to 3.75%, although three members dissented in favor of a 0.25% increase—the first time in recent years that multiple members have advocated raising rates.

The competing forces are clear. Economic growth and employment remain reasonably resilient, while inflation remains sticky, and above the Fed’s 2% target. Second-quarter GDP grew at an annualized rate of 1.5%, unemployment was 4.1% in July, and core PCE inflation was 3.6%. Recent comments from Boston Fed President Susan Collins underscore the uncertainty: she has indicated that a rate increase could be appropriate if the data fail to demonstrate continued progress on inflation.

For ACGA, however, the more important consideration is what is happening to longer-term interest rates. The 10-year U.S. Treasury yield stood at 4.66% on August 26, while the 30-year yield was 5.18%. These yields remain well above the federal funds rate and have not simply followed the Fed’s policy rate lower. This is an important distinction for charitable gift annuity issuers and donors. While the Fed’s policy rate receives considerable attention, the yields available in the broader bond market are ultimately more relevant to the economics of a gift annuity.

ACGA’s Rates & Regulations Committee met earlier this month and recommended maintaining the current Suggested Maximum Rate Schedule. The Committee’s decision reflects its longstanding, rules-based approach to evaluating interest rates across different maturities and time periods rather than reacting to individual market movements or changes in Federal Reserve policy.

The current combination of elevated longer-term yields, persistent inflation, and uncertainty about the Fed’s next move warrants continued attention, but does not warrant a change in ACGA’s Suggested Rates at this time. The Committee will continue to monitor market conditions closely and recommend adjustments when appropriate.

ACGA’s objective remains to provide Suggested Maximum Payout Rates that appropriately balance the interests of charitable gift annuitants and issuing charities, while giving both the confidence that comes from a thoughtful and disciplined approach to changing market conditions.