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Page 3 of 4 <br />City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org <br />o Improved labor market conditions <br />o Depressed consumer confidence <br />Federal Reserve is reducing monetary policy accommodation <br />o Accelerated pace of asset purchase tapering <br />o Fed expects three rate hikes in 2022 <br />o Changing composition of the Federal Open Market Committee (FOMC) leadership <br />The U.S. Treasury yield curve experiences “bear-flattening” <br />o Short-term yields shift higher amid rate hike expectations <br />o Long-term yields adjust to evolving inflation and economic growth uncertainties <br />The overall message from the December 31, 2021 investment report is: U.S. Gross Domestic Product <br />output has rebounded from the pandemic and consumer prices have risen to a 40-year high. <br />For the quarter ended December 31, 2021, there are several factors that have helped drive growth: <br />Better than-expected corporate profit margins have helped fuel equity markets <br />Unprecedented accommodative monetary policy and fiscal stimulus <br />Access to COVID-19 vaccines and reduction of pandemic-era lockdowns <br />Continued adaptation of all sectors of the economy to the challenging health situation. <br />However, growth is expected to moderate, due to the following: <br />Persistent damage to supply chains continue to disrupt the production and distribution network <br />Age-related impacts to labor force growth predating the pandemic <br />Return to more normal household income and saving trends <br />Normalizing fiscal and monetary policies <br />PFM will continue to be selective when evaluating new issues in all sectors. <br />PFM has provided an in-depth market update in the attached investment report. <br />FISCAL IMPACT <br />The City’s portfolio received $792,902 in net interest earnings over the reporting period, down from <br />$1,060,416 for the quarter ended September 30, 2021. All interest earnings are allocated monthly through <br />a preset methodology that spreads earnings to the appropriate funds. Fees for PFM’s services during this <br />period were $26,693, up from $26,594 last quarter, and are paid out of total interest earnings. There is <br />no additional budget appropriation required. <br />ENVIRONMENTAL REVIEW <br />This activity is not a project under California Environmental Quality Act (CEQA) as defined in CEQA <br />Guidelines, section 15378, because it has no potential for resulting in either a direct or reasonably <br />foreseeable indirect physical change in the environment. <br />6.A. - Page 3 of 47 <br />7