Quarterly Letter to Members | |
The Fed Cut Rates, But Didn’t Cut Loose
By KeyBank Institutional Advisors
The Federal Reserve’s September meeting delivered what markets expected – but the real story is the nuance. With a 0.25% rate cut bringing the federal funds target range to 4.00% - 4.25%, policymakers opened the door to further easing but deliberately avoided over-committing.
Powell’s Balanced Approach
In his press conference, Chair Jerome Powell leaned heavily on the phrase “balanced approach.” He framed the move as a response to cooling job growth and rising downside risks to employment – but he was quick to remind markets that inflation is still above the 2% goal and could flare back if policy gets too loose. The message was clear: the Fed is ready to cut more if conditions warrant, but it will proceed one meeting at a time.
The SEP Speaks: Lower, Slower
The Fed’s latest projections reinforce its patient stance. The median policy path now shows the federal funds rate ending 2025 at 3.6%, down from 3.9% in June, with a further drift lower to 3.4% in 2026 and 3.1% in 2027. Growth expectations have actually ticked up slightly, with real GDP now projected to expand 1.6% in 2025 and rising toward 1.9% by 2027, suggesting the Fed believes it can deliver rate relief without derailing expansion.
Unemployment is expected to edge up to 4.5% before gradually drifting lower in later years – a sign the Fed is comfortable with modest labor market softening if it helps bring inflation back to target. Inflation projections remain above the 2% goal for some time. With PCE inflation at 3.0% in 2025, easing to 2.6% in 2026 and near 2% by 2027. Together, the projections signal a measured glide path: lower rates, but not a rush to the bottom.
Investor Implications
For investors, the combination of a modest rate cut, and lower projected path is supportive of risk assets – but the “careful step” message tempers expectations for a rapid cutting cycle. Front-end duration stands to benefit the most, while tight credit spreads argue for selectivity. Equity multiples may get a gentle tailwind from lower discount rates, but slower growth means earnings quality matters.
Bottom Line
This is the Fed’s opening move, not its endgame. The central bank is cutting, but not cutting loose. Aiming to thread the needle between keeping the expansion alive and avoiding an inflation resurgence. Powell’s emphasis on balance suggests each meeting will be a fresh decision, and markets will have to trade the data, not the dots.
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The Key Wealth Institute is comprised of a collection of financial professionals representing Key entities including Key Private Bank, KeyBank Institutional Advisors, and Key Investment Services. Any opinions, projections, or recommendations contained herein are subject to change without notice and are not intended as individual investment advice.
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Bank and trust products are provided by KeyBank National Association (KeyBank), Member FDIC and Equal Housing Lender. Key Private Bank and KeyBank Institutional Advisors
are part of KeyBank. Investment products, brokerage and investment advisory services are offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC registered investment advisor. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA). KIS and KIA are affiliated with KeyBank.
KeyBank and its affiliates do not provide legal advice. Individuals should consult their personal tax advisor before making any tax-related investment decisions.
© 2025 KeyCorp. 230720-2172668-1268483519
INVESTMENT PRODUCTS ARE: NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENT AGENCY
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Series I Recap
The month opened with a $896,807,133 share balance and closed with a balance of $903,641,902. The seven-day effective yield ended the month at 4.09%. The monthly seven-day average yield in September was 4.20%. Average maturity ended the month at 17 days.
As of September 30th, 2025, the Series I portfolio had 12% of its portfolio assets allocated to overnight investments/cash, corporate securities made up 8% of the assets, Commercial Paper represented 31%, CDs represented 6%, and Treasury & Agency represented 43%.
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Series II Recap
The month opened with a $116,321,088 share balance and closed with a balance of $122,082,694. The thirty-day SEC yield ended the month at 4.35%.
On September 30th, 2025, the Series II portfolio had 2% of its portfolio assets allocated to overnight investments/cash, corporate securities made up 45% of the assets, Commercial Paper represented 15%, CDs represented 16%, and Treasury & Agency represented 22%.
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Comparisons
On September 30th, 2025, the S&P AAA & AA Rated GIP Tax 30 Day Yield Index was 4.27%, the Series I Pool's 7-day SEC effective rate was 4.10%, and the Series II Pool’s 30-day SEC effective rate was 4.42%. All Pool rates are quoted net of fees and expenses.
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Cheyenne Heindel - President
Matanuska-Susitna Borough
Philip Hulett
Galena City School District
Mason Villarma
City & Borough of Wrangell
Kris Erchinger
City of Whittier
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Angie Flick - Vice President
City & Borough of Juneau
Jody Tow - Treasurer
Petersburg Borough
Brennan Hickok
APRA
Nils Andreassen - Executive Director
Alaska Municipal League
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AMLIP Membership
If any of your local school districts or municipal agencies are interested in enrolling, please reach out to info@amlip.org.
90 Members Representing 234 Total Accounts
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Adak, City of
AIDEA
Akutan, City of
Alaska Association of Municipal Clerks
Alaska Govt Finance Officers Association
Alaska Municipal League
Alaska Municipal Management Association
Aleknagik, City of
Aleutians East Borough
AML/JIA
Anderson, City of
Angoon, City of
Annette Island School District
Atka, City of
Atqasuk, City of
Bethel, City of
Brevig Mission, City of
Bristol Bay Borough
Chevak, City of
Chuathbaluk, City of
Cold Bay, City of
Cordova, City of
Delta Junction, City of
Denali Borough
Dillingham, City of
Eagle, City of
Eek, City of
Egegik, City of
Elim, City of
Fairbanks North Star Borough
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Fairbanks, City of
False Pass, City of
Fort Yukon, City of
Galena, City of
Gustavus, City of
Haines, City and Borough
Homer, City of
Hoonah, City of
Huslia, City of
Juneau, City and Borough
Kachemak, City of
Kake City School District
Kenai Peninsula Borough
Kenai, City of
Ketchikan Gateway Borough
King Cove, City of
Kodiak Island Borough
Kodiak, City of
Kotzebue, City of
Koyuk, City of
Manakotak, City of
Marshall, City of
Matanuska-Susitna Borough
McGrath, City of
Mekoryuk, City of
Mekoryuk, Village of
New Stuyahok, City of
Nome, City of
North Pole, City of
Northwest Arctic Borough
Nulato, City of
Old Harbor, City of
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Nulato, City of
Old Harbor, City of
Palmer, City of
Pelican City School District
Pelican, City of
Petersburg School District
Petersburg Borough
Pilot Station, City of
Pribilof School District
Quinhagak, City of
Sand Point, City of
Selawik, City of
Seldovia, City of
Seward, City of
Sitka, City and Borough
Soldotna, City of
Southwest Alaska Municipal Conference
St. Paul, City of
Tenakee Springs, City of
Toksook Bay
Unalakleet, City of
Unalaska, City of
Upper Kalskag, City of
Utqiagvik, City of
Wasilla, City of
Whale Pass, City of
Whittier, City of
Wrangell School District
Wrangell, City and Borough
Yakutat, City and Borough
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Interested in enrolling one of your municipal agencies or school districts?
Contact us at info@amlip.org!
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Account information:
Brian Crosby
Vice President and Sr. Relationship Manager
216-689-5190
brian_crosby@keybank.com
Kris Nedwick
Vice President and Sr. Relationship Manager
907-564-0409
kris_nedwick@keybank.com
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Investment Related Questions:
Blake Phillips
Director of Institutional Solutions
907-646-3505
blake@apcm.net
Lindsey Cashman
Client Relationship Manager
(907) 646-3532
lindsey@apcm.net
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