Stable Value Assets in Rising-Rate Environments

Research

07/12/2018

Wayne Wicker, CFA

Senior Vice President and Chief Investment Officer

Karen Chong-Wulff, CFA, CAIA

Managing Vice President, Fixed Income

In 1979, Chairman Paul Volcker announced the Federal Reserve would be shifting its focus from managing
the volume of bank reserves to instead managing the Federal Reserve (Fed) funds rate. This move was in
response to an economic condition that came to be called “stagflation,” or rising inflation during a period
of sluggish economic growth.1 Mr. Volcker was eventually successful in taming inflation, but it required a
meteoric rise in the Fed funds rate, which ended at a record high of 20 percent in January of 1981. Since
then, the United States has been in a long-term downward trending interest-rate environment.

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