Federal Reserve Approves First Interest Rate Hike in More than Three Years, Sees Six More Ahead (cnbc.com) 90
The Federal Reserve on Wednesday approved its first interest rate increase in more than three years, an incremental salvo to address spiraling inflation without torpedoing economic growth. From a report: After keeping its benchmark interest rate anchored near zero since the beginning of the Covid pandemic, the policymaking Federal Open Market Committee said it will raise rates by a quarter percentage point, or 25 basis points. That will bring the rate now into a range of 0.25%-0.5%. The move will correspond with a hike in the prime rate and immediately send financing costs higher for many forms of consumer borrowing and credit. Fed officials indicated the rate increases will come with slower economic growth this year.
Along with the rate hikes, the committee also penciled in increases at each of the six remaining meetings this year, pointing to a consensus funds rate of 1.9% by year's end. That is a full percentage point higher than indicated in December. The committee sees three more hikes in 2023 then none the following year. The rate rise was approved with only one dissent. St. Louis Fed President James Bullard wanted a 50 basis point increase. The committee last raised rates in December 2018, then had to backtrack the following July and begin cutting.
Along with the rate hikes, the committee also penciled in increases at each of the six remaining meetings this year, pointing to a consensus funds rate of 1.9% by year's end. That is a full percentage point higher than indicated in December. The committee sees three more hikes in 2023 then none the following year. The rate rise was approved with only one dissent. St. Louis Fed President James Bullard wanted a 50 basis point increase. The committee last raised rates in December 2018, then had to backtrack the following July and begin cutting.
In accordance with the prophecy (Score:3)
Now they pick up the phone line to the puppet government and order interest rates to go up.
Next they sit back and watch the real value of their acquired debt dissolve, real value of worker wages they are paying erode, and nominal value of assets (including the bought-back stock) skyrocket.
Sure, it's possible that what we have that the corporations are rational and make shrewd decisions to exploit government policy to the fullest. But it sure is tempting to believe they simply the ones creating their own policy outright.
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We can argue up and down about interest rates being kept artificially low for far too long, but it has nothing to do with the current situation. If you really foresaw all of t
Nope (Score:3, Insightful)
Seriously, how long are you going to push these long since discredited nonsense?
So I normally don't feed trolls (Score:2)
Middle class and poor (not lower class) Americans were _worse_ off under Trump.
Just like what happened with Reagan a Democrat fixed the economy and a Republican took credit for it.
Worse, Trump and his GOP congress repealsed Dodd-Frank. Not the bill, but all the provisions of the bill. So all the post 2008 rules meant to prevent another economic crash were gone, not that Trump's DOJ was enforcing any of them.
Trump's Fed was pumping INSANE amounts of cash in
Re: So I normally don't feed trolls (Score:1)
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You just can't stop lying, can you?
rsilvergun is a Putin-funded trollfarm employee (Score:2)
So delicately you reference the murderous invasion of Ukraine by Putin without crossing the line that could see you jailed for 15 years. Your priority here is criticizing American political groups to create divisiveness while never finding a moment to utter humanitarian phrases such as "Putin is a war criminal."
I am pleased to see you living in the New North Korea you have helped to create. May the frigid air chill your bones as you stand in your hours-long bread lines next
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Keynesian Economics says you should stimulate (print / inflate money) when the economy is depressed and then pay off your debt when the economy is good. So far we have been printing money when the economy is good and bad and so now we find ourselves in an inflationary environment. Why should you print money when the economy is good... shouldn't you be collecting that extra money in taxes and paying down the debt to avoid inflation?
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Where are my mod points (haven't gotten any in months due to the system being broken).
Keynesian policy would work IF the second part was implemented correctly. But it never is. It's only the first part we hear about, and that's done on an endless basis.
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Where are my mod points (haven't gotten any in months due to the system being broken).
Keynesian policy would work IF the second part was implemented correctly. But it never is. It's only the first part we hear about, and that's done on an endless basis.
Indeed. Keynesian stimulus has been demonstrated to be effective. Raising taxes or whatever during boom times doesn't win elections. In the UK taxes are going up next month, though, so it can happen. The timing probably isn't good as it comes at the same time as rising energy bills.
Keynesian isn't always right (Score:2)
But make no mistake, we make more of everything every year. We already have enough food to end starvation globally and enough houses to end homelessness in every modern country. That is, to me, a "
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Why should you print money when the economy is good
Easy. To keep the economy good so people will vote for you.
Being responsible and planning for longer than the next election is for losers.
shouldn't you be collecting that extra money in taxes and paying down the debt to avoid inflation?
Well you should. But nobody votes for that shit. Fiscal responsibility died a long time ago.
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A lot of small retail shops were closed up too, things like shoe stores, cookware. Unrelated to the OP, but there was idiocy in closing small shops with 1,000 customers is more of a problem than 1 infectious employee seeing
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But they have really been aggressive in printing money though:https://fred.stlouisfed.org/series/WALCL [stlouisfed.org] (that's the Fed balance sheet - while they do get money from interest payments on the debt they own, most of the increase is printed money). Here's the M2 chart. [stlouisfed.org]
What that looks like to me is that they're printing money to help the economy, not in response to a growing economy.
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How about the trillions that the Fed has pumped into the repo markets since 2009? Ever ask yourself where all that money went?
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Preach it Q!
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What they're doing is raising rates to reign in inflation which does the opposite of all that.
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The mega corporations that run our government: Just finished ten years of gorging on low-interest debt and using it to buy back their stock.
Now they pick up the phone line to the puppet government and order interest rates to go up.
Next they sit back and watch the real value of their acquired debt dissolve, real value of worker wages they are paying erode, and nominal value of assets (including the bought-back stock) skyrocket.
Sure, it's possible that what we have that the corporations are rational and make shrewd decisions to exploit government policy to the fullest. But it sure is tempting to believe they simply the ones creating their own policy outright.
That's not how interest rates work.
Low interest rates make it cheaper to borrow money, which increases the money supply (and generally incentives investment). I don't know if it would disproportionately help corporate profits, I suspect the Trump tax cuts had more to do with that.
But as for the rate hike now, they're trying to slow the rate at which the money supply is growing to combat inflation. Which is exactly the opposite of what you would do if you wanted to inflate away a debt.
Overdue (Score:5, Insightful)
Should have done this years ago. Lowering the prime interest rates gooses the economy and tamps down bubbles. When you keep interest rates near zero for years and years, it props up asset bubbles and, when goosing the economy is needed, you have fewer tools in your toolbox.
Re: Overdue (Score:2)
Two years ago was the beginning of the US Covid lockdown. They lowered rates at that point, and for good reason.
They did wait too long to jack them back up, though, which is why we now have an inflation problem.
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Problem is that housing has become unaffordable for many people, and putting up interest rates just makes it even harder for them. The whole economy needs a re-think, particularly property. Hopefully work-from-home sticks and helps bring that about.
Balance (Score:2)
Higher interest rates do make mortgages more expensive. The flip side of that, however, is that it makes it more expensive for property speculators to inflate the cost of housing as well. The two pressures generally cancel each other out in most markets, but not all.
You saw this in the runup to the 2006 crash. Low mortgage rates caused housing prices to skyrocket due to property investment and speculation, countered with the reverse incentive of low interest rates making traditional long-term investments ha
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Seems like a better method of controlling house prices would be to simply tax buy-to-let or buy-to-invest quite highly.
I'm a harbinger of doom (Score:3, Funny)
To anyone else looking to buy a home or refinance or anything related to this I say: sorry about that. My bad, I caused this.
Jokes aside, they're doing this because of inflation, but this won't solve the problem. The problem is 20+ years of nonstop mega mergers. But when you're only tool's a hammer... I mean, it's not like we're gonna stop letting what passes for an aristocracy in this country take 40% of everything before we get a crack at it.
Seriously, think about that. You spend the 1st 5 months of the year giving every penny you earn to the top 1%. Why do we do that? I mean, are Elon Musk and Mark Zuckerberg's contributions to our lives really worth 5 out of 7 months of our working lives?
I guess the majority of us think the answer is "yes".
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Re:I'm a harbinger of doom (Score:5, Insightful)
"buyers" are NOT paying in cash (Score:2)
What was the phrase? "You'll own nothing and you'll like it". Yeah, right.
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I always wonder about this. Sales are in near record territory [substack.com] - how can supply be low? This strikes me as an overheated demand issue. If supply were really low, then you'd see what happened with cars. Their sales actually dropped in response to supply constraints. [stlouisfed.org]
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with the exception those portions of single family homes and condos that are bought through hedge funds and real estate speculation.
That would be true if (Score:3, Insightful)
Mega corps are destorting the housing market.
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Maybe we shouldn't have shut down our economy while still running the printing presses to make even more money. Turns out that having more money but fewer goods makes the money less valuable.
Opendoor didn't (Score:2, Informative)
Take your right wing conspiracies nonsense back to 8chan. Every single study shows lockdowns *improved* the economy. You know this, because it was covered here on
Turns out right wing politics don't work, they just make old people feel better about getting old. Is that really worth it? Do you like working 5 months a year to line Jeff Bezo's pockets?
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Zillow got out of the house flipping business
True, but there is still Opendoor which is the largest home flipper in the country still buying houses. Not to mention Blackrock is buying homes as well and keeping them off the market to artificially drive up prices.
Maybe we shouldn't have shut down our economy
The economy was never shut down. We weren't even close to being shut down. All the anti-vaxxers saw to that. Of course they were the same ones dying from covid, but that's a whole other story.
while st
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People keep saying this, but I haven't seen a single property where I live purchased by any of these big corporations. I've heard all the stories of how Zillow "wanted to get into the business of amassing properties for resale from a catalog of holdings". But I find it hard to believe this actually happened in sufficient numbers to cause housing shortages.
The housing market, IMO, is simply going through yet another boom/bust cycle. Low interest rates and people generally having improved credit scores caus
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The inflation is a result of simple supply and demand economics, like trying to buy a GPU in today's market because the crypto miners gobble up all the inventory. Raising interest rates is just going to mean it'll now cost more to buy a car or house (if you need financing, which is probably most people), and the money in our pockets still won't buy what it used to.
The housing market just sucks ass for a myriad of reasons only loosely related to the interest rates. Mainly because housing prices are locked
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I don't really get your rationale?
If you're seriously looking at buying a house and about ready to pull the trigger on it? Just get out there and do it! Interest rates are only incrementally bumped up as of today, and they won't be raised significantly in the short term future.
If you live on one of the coasts where housing prices are extreme? My advice here may not apply, but all I could tell you then is to look at a move. (Quite frankly, the amount you'd save on a house by doing that strategically will r
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Sounds like they're doing this at the *perfect* time for you. House prices are completely unrealistic because it's basically free to borrow money to buy them. That had to end, and now it is. Be glad you didn't buy a house and then they decided to raise rates.
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You keep saying this...what exactly do you mean?
Are you talking about how long you have to work a year to pay your taxes to the federal govt?
Is the federal govt what you are referring to as the 1%?
That's a new one on me...please expand upon what you mean, as that I'm sure I'm not the only one that is missing your point.
What does this have to do with technology (Score:2)
Re:What does this have to do with technology (Score:4, Funny)
Nothing. This is Dicedot (Score:2)
Only IRL boomers remember News for Nerds.
Alas, it is time. (Score:3)
After the absolute cock-up that the world has become over the past few years, mostly through the actions and inactions of the big money holders, it's vitally essential that the middle-class and lower classes start paying their god damned dues. Rest assured, any large businesses and multi-millionaires will find ways to shield themselves from this. It's just vitally important that we make sure the middle and lower classes be reminded of their places.
time for the middle-class to step up (Score:2)
I feel that every nation's constitution should be rewritten to include public funding for guillotines in every town square. And maybe we also outlaw the death penalty. Except in cases where the convicted has over $1B in assets, then any misdemeanor carries a penalty of capital punishment.
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I like where your head's at, but feel the prospects of death wouldn't be enough to incentive the rich to start paying attention to the consequences of their actions. I feel a more appropriate solution would be any misdemeanor, no matter how small, is immediately followed by a fine of all assets save the yearly salary of the average person in the area the person lives. Say you have a billion dollars, as a round example, and the people in the city this person lives in make, on average, 100k a year (probably a
Way too little, way too late (Score:2)
Interest rates only help fight inflation if you raise interest rates well above whatever inflation you are fighting.
Well even the lowballed government inflation figure is 9% now, so several interest rate hikes of 0.25% are just not going to cut it, and inflation will keep rising.
They will have a pretty dramatic effect on the stock market though, which is why you will not actually see seven rate hikes this year. Because that would affect the stock market in a bad way.
On a side note, I'm not really sure if t
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Interest rates only help fight inflation if you raise interest rates well above whatever inflation you are fighting.
That's extremely simplistic / wrong.
If entirely depends on how leveraged the people who borrowed the money are. How much debt there is.
If you're in debt up to your eyeballs, even a tiny increase in interest rates will affect your spending in a drastic way. Up to and including bankrupting you. If you have no debt and pay cash for everything. Even Russia's 20% interest rates won't stop you spending your money.
In aggregate if enough people are already in a lot of debt. Which is quite likely with debt being s
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It's almost like the economy isn't a static thing and is influence by far more factors than some twitter happy pumpkin.
If you weren't aware of that, well, sorry.
Nice try, Ivanka (Score:4, Informative)
The Trillion Dollar tax cut went to the rich. Huge job losses for everyone else.
Keep buying from China and funneling taxpayer money to those golf courses, crook.
My favorite were the airlines (Score:2)
The Swamp draining intensifies...
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however, he cut taxes for everyone and had policies which spurred business
Not really "everyone". After 2025, all individual tax cuts will expire. Corporate rate cuts were made permanent. That's why at the time, it was commonly called "the tax scam bill".
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however, he cut taxes for everyone and had policies which spurred business
future inflation and future inflation
interest rates also remained low and the old QE policies continued as well
future inflation and future inflation
inflation seemed but a distant memory
You're only looking in the past? If you want to predict the future, it's best to consider what will happen in the future...
As usual, the Fed is behind the curve (Score:2)
Interest rates should have been raised starting in 2019, paused in 2020, then resumed last year. Two or three per year. No more.
Also, the socialist policy of buying debt because private companies couldn't get their act together should have stopped long ago. It is not the government's job to keep propping up all these failures at the expense of the taxpayers.
Instead, here we are, with the Fed trying to play catch up. But this shouldn't be surprising when the same Fed said there was no inflation for the pas
Re: As usual, the Fed is behind the curve (Score:2)
I have no idea why you blame socialism. If it really was really a socialistic move, the government would've demanded equity if not outright company buyouts to nationalize the enterprise. This is just corporate welfare, which seems more in line with capitalist malfeasance.
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This is just corporate welfare
According to Republicans, welfare is socialism because people are getting something for nothing. The same with the Fed buying bonds from private companies.
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Because Americans have been indoctrinated for seventy years with "socialism == bad". Since it's an equivalence, it works in reverse too: bad == socialism.
ready your cash for the crash (Score:2)
How high do rates have to go before the housing bubble bursts? Plenty of people are already under mortgage stress, there was TFS just yesterday(?) about record numbers living one pay check to next. My bold prediction is that real estate is currently 20-30% over valued and a correction could come at any time.
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Yeah. I feel bad for the people who feel like they have to buy a house because their spouse wants one, or they've been told all their lives you've got to get one.
Not bad enough that I won't get in on the deals when they all default though.
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Lol. You rsilvergun impersonators need to learn to read.
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Depends on where you are talking about, and what price range. Starter homes in many traditionally less expensive areas are likely to drop, as are upper mid-range homes in similar markets. Traditionally more premium markets are likely to see less significant dips-- prices haven't gone up quite as irrationally. It will be interesting to see what the institutional money ends up doing-- are they thinking short or long term?
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Most people buy based on the monthly payment. Higher mortgage interest rates leads to a lower sales price to maintain this equilibrium. So looking at the market overall, prices will drop. Housing bubble burst? Not likely if there are a lot of people sitting on the sidelines with cash, waiting for a deal. And people with lots of cash are less dependent on the mortgage interest rates. They aren't going to need as big a mortgage.
So, not so much a bubble burst as price adjustments. The people who are going to
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When I was growing up, double digit interest rates were the norm at the time.
It didn't stop housing back then.
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The Bare Minimum in Planning (Score:2)
"Five years from now if the interest rate is 5% higher than it is now, based on my wage today, could I afford it?"
No? Don't roll the dice.
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Well, that is the selection between an ARM and a fixed rate loan. If you bought under a fixed rate, the interest rate doesn't go up when the rates rise.
Use an ARM when house values are low, but interest rates are high, then refi when the rates eventually drop.
How can the Fed know exactly 10 hikes (Score:2)
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Thanks (Score:1)
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