Recent volatility in equity markets has sparked calls by some commentators for “emergency” Fed action. With all eyes on the Fed, some donors and CGA issuers may wonder about the possibility of near term rate changes and their impact on ACGA’s Suggested Maximum Rate Schedules. 

Equity market volatility was largely sparked by investor concern with two weaker-than-expected economic figures: the ISM Manufacturing survey and the monthly jobs report. Both painted a picture of an economy that is slowing, but not contracting. With inflation still above the Fed’s 2.0% target, there is no reason to panic.  

That said, the Fed may use its annual Jackson Hole symposium later this month to outline a path to a less restrictive and more “normal” or “neutral” posture given the now more balanced backdrop for both employment and inflation. Should the Fed begin to cut rates in the fall, it is expected to act with prudent and conservative 0.25% or 0.50% moves. 

Such actions will not force an imminent change in ACGA’s published schedules given the rate model’s built-in assumptions and smoothing mechanisms. This proven approach helps alleviate volatility in the published rates and provides greater confidence and clarity to both charities issuing gift annuities and their donors.

While the Council continues to believe that the current Suggested Rates are appropriate given existing market conditions, ACGA member organizations and their donors can rest assured that the Council closely monitors market conditions and will change rates as necessary to provide Suggested Maximum Payout Rates that are attractive to both the annuitant and the issuing charity.