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Federal Reserve Cuts Rates By Half a Point and Signals Era of Easing Has Begun (ft.com) 134

Posted by msmash from the breaking-news dept.
The Federal Reserve cut its benchmark interest rate by half a percentage point [non-paywalled source] on Wednesday and signalled more reductions would follow, launching its first easing cycle since the onset of the pandemic. Financial Times: The US central bank's first cut in more than four years leaves the federal funds rate at a range of 4.75 per cent. Michelle Bowman, a governor on the Federal Open Market Committee, voted against the decision, favouring a quarter-point reduction. The half-point cut is larger than the Fed's more customary quarter-point pace and suggests the US central bank is concerned about the prospects of a weakening economy after more than a year of holding rates at a 23-year high.

Federal Reserve Cuts Rates By Half a Point and Signals Era of Easing Has Begun More | Reply

Federal Reserve Cuts Rates By Half a Point and Signals Era of Easing Has Begun

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  • "Federal Reserve Cuts Rates By Half a Point and Signals Era of Easing Has Begun"

    Does it, though? Certainly that's how it's being perceived. But it seems irresponsible to confuse perception with reality, just because every finance d00d in the country spends all day every day attempting to convert their consensus perception into reality through sheer volume of their applause of Tinkerbell.

    • Correction: For Tinkerbell, not of Tinkerbell.

    • My prices are down (Score:4, Interesting)

      by rsilvergun ( 571051 ) on Wednesday September 18, 2024 @02:43PM (#64796979)
      Gas is about the same (adjust. for inflation) as it was when Reagan won his second term. I'm back to paying $1.20 for an 8oz pack of cheese slices and $5 bucks for a dozen fancy eggs (they last longer so I pay the extra). Coke is consistently $5 bucks a 12 pack when it was pushing $9/12pack. etc, etc.

      The issue was price gouging. The way you fight that is with competition. Cranking interest rates to cause mass layoffs [youtube.com] isn't a solution, it's just our betters yanking our chains.

      If you want even lower prices, do more anti-trust law enforcement, break up the trusts and monopolies and having the government subsidize more supply like we're doing with computer chips.

      • Re: (Score:2)

        by dbialac ( 320955 )
        It always seemed like a factory of some sort happens to burn down, the price of the product goes up, but when the factory resumes operations, the price only goes down by 1/2 of the increase. It's a common trick being played so that people don't mind the price hike because it's relief from the intervening price hike.

      • The issue was price gouging

        Major economists disagree with you: https://www.cnn.com/2024/05/15... [cnn.com]

        Occam's Razor seems to disagree as well. Namely eggs went up because of bird flu. Car costs went up because of chip shortages. Car insurance went up because accidents went up. Housing went up because of a housing shortage. And so forth...

        Tho some degree of profit taking was likely present, it was far and away not a major driver of inflationary effects.

  • About time (Score:5, Insightful)

    by rsilvergun ( 571051 ) on Wednesday September 18, 2024 @02:25PM (#64796909)
    We have leaked communications from some of the guys in the fed where they say rates should've been cut in July. But, well, there's an election coming up...

    In any case there's no indication the rate hikes helped inflation. The targets were 2%, inflation month to month hovered around 3-4%. It stopped when consumers hit their limit on higher prices and when the DOJ started doing anti-trust lawsuits seriously.

    For example in the Kroger/Albertson's merger they did a full discovery and found emails where the guys running the merger talked about how they were selling 500+ stores to get approval for the merger, but selling them to a company they knew wasn't up to the task and would sell them right back in a year or two.

    Anti-trust law is what'll control inflation. That and increasing supply. Competition & supply are what keep prices down, not mass layoffs and people blowing through their retirement savings.

    • What if mainstream economics has inflation wrong and the real picture was grasped much better by Fischer Black in "Noise"?

      "I think that the price level and rate of inflation are literally indeterminate. They are whatever people think they will be. They are determined by expectations, but expectations follow no rational rules. If people believe that certain changes in the money stock will cause changes in the rate of inflation, that may well happen, because their expectations will be built into their long te

    • Of course the rate hikes didn't help (Score:5, Insightful)

      by DeplorableCodeMonkey ( 4828467 ) on Wednesday September 18, 2024 @02:39PM (#64796955)

      In any case there's no indication the rate hikes helped inflation.

      Of course not. They were printing $2T per year. If you're going to add that much money to the money supply you'd need to go much further than Volcker did in raising the rate in order to avoid a net increase in the money supply.

      Anti-trust law is what'll control inflation. That and increasing supply. Competition & supply are what keep prices down, not mass layoffs and people blowing through their retirement savings.

      Anti-trust is only part of it. A massive purge of illegal immigrants and low skill legal immigrants would do even more. Legal or illegal, doesn't matter. The net population increase has had a terrible impact on housing prices. Increasing supply doesn't help there if you are mass importing more population and contrary to what lolbertarians want to believe, immigration has been a net negative for the West since we get half a dozen low to no skill immigrants for every high skill immigrant.

      You know who aren't huge wealth producers and tax payers? Low and no skill people. We can't even provide for our own poor effectively, but we mass import them to keep wages down and the natives in line.

      • Wrong, Trump did a $2trn stimmy and Biden came into office and did another $2trn stimmy. Add in the fact that you couldnt get evicted for a while, student loan payments were paused, than some student loans (held by the government) was forgiven, small business loans given during covid didnt have to get paid back. There was a SHIT ton of stimmy in some form or fashion.

      • Re:Of course the rate hikes didn't help (Score:4, Interesting)

        by jacks smirking reven ( 909048 ) on Wednesday September 18, 2024 @02:53PM (#64797029)

        immigration has been a net negative for the West

        And yet every economist on the planet disagrees (even the most ardent anti-immigration Borhas could only find an issue at the very edges) and the Unites States own position as the global superpower flies in the face of this assertion. Is this where we are

        Maybe the solution to our problem is to build more houses for people who want to live and work here since, and i know this is wild, more labor means more productivity.

        Low and no skill people.

        Dead wrong. Low skill labor still increases productivity and in fact lets more skilled people do more skilled tasks as now there are more people to take up that labor need.

        Do you have any economic data to support your views?

        We can't even provide for our own poor effectively

        For the 1000th time, economics is not a zero-sum issue. Who did you vote for? What are their pro-poor and working class policies?

        • Re:Of course the rate hikes didn't help (Score:5, Insightful)

          by dbialac ( 320955 ) on Wednesday September 18, 2024 @03:57PM (#64797305)
          I live in Appalachia. I've watched as American workers can't find work because illegal immigrants can get paid less because they don't pay income taxes. Depending on the president, they also face the threat of deportation which does force a more submissive work ethic. This works to the advantage to some of us because we get cheaper labor, but to the disadvantage of blue collar workers. Because American workers can't find work because they pay taxes, we're seeing a huge problem with drug use, especially fentanyl. The last two men who mowed my lawn, both US citizens, are now in jail for drug use. They do that because the local factories shut down because the greedy owners closed them down and opened new ones in China. They're getting tugged in three directions as a result: having to pay taxes, decreased wages because of illegal immigrants who don't, and offshoring. Another nearby factory was bought out by its own employees about 20 years ago. Greed drove them to then sell it when an offer came their way and now the new owners have shut it down and opened new factories in... China.

          • Re:Of course the rate hikes didn't help (Score:4, Insightful)

            by jacks smirking reven ( 909048 ) on Wednesday September 18, 2024 @04:10PM (#64797347)

            because illegal immigrants can get paid less because they don't pay income taxes

            Great, start cracking down on the businesses that hire them then, that's called a "pull factor", people don't immigrate to not work, they come to work.

            they also face the threat of deportation which does force a more submissive work ethic.

            Great, issue more work visas as well as crack down on employers. Why does nobody talk about cracking down hard on the employers?

            disadvantage of blue collar workers

            Show your data, almost all the data shows immigration, even illegal and even low skilled leads to higher overall wages and growth.

            can't find work because they pay taxes

            Back this up for me please. If a company is hiring illegals 9/10 times they using a stolen SSN so taxes are paid regardless.

            with drug use, especially fentanyl.

            Are the immigrans using fantanyl or the natives? Can you show some data here?

            The last two men who mowed my lawn, both US citizens, are now in jail for drug use.

            And thats the fault of immigrants?

            closed them down and opened new ones in China.

            I agree, that;s not the fault of immigrants, that American businesses doing American capitalism, blame them for outsourcing to boost share prices.

            decreased wages because of illegal immigrants

            I know this "feels" true but it actually isn't true. The most bearish economic studies were done again, by Borhas (go read his work) and at most the could find was a wage increase for non-high-school graduates which are a very small slice of the population the wage drop was less than 5% overall, easily remedied by social spending. Everything else goes up, for natives, for low skill, high skill. Rising tides....

            Greed drove them to then sell it when an offer came their way and now the new owners have shut it down and opened new factories in... China.
               

            Once again, is this the fault of immigrants or greedy businesses and inefficent policies?

            Look at countries which heavily restrict immigration and watch their economies recede. America is built on immigration, our ability to integrate people from all walks of life is the real American superpower, are we gonna turn the clock back on that and make everyones lives worse because of culture war uncomfortableness and "feelings over facts"?

            • Re: (Score:2)

              by dbialac ( 320955 )
              You really are stuck in your own world, aren't you. I'm not your research assistant. If you want to see this truth, come to Appalachia and look for yourself. I see it every day. Strangely missing from your responses are any studies re-enforcing what you claim as well, ant the 9/10 using forged SSNs is frankly laughable. I do, however, agree that company owners are in part responsible for this, but illegal immigration also provides the opportunity for them to hire them. If there are no illegal immigrants, at

        • Re: (Score:3)

          by Pascoea ( 968200 )

          What are their pro-poor and working class policies?

          They just pretend that poor people exist. https://www.nbcnews.com/politi... [nbcnews.com]

        • And yet every economist on the planet disagrees

          Who cares? They might as well be alchemists for all of their inability to make their stuff actually work in real world, profitable ways.

          Dead wrong. Low skill labor still increases productivity and in fact lets more skilled people do more skilled tasks as now there are more people to take up that labor need.

          We hit a technology inflection point a long time ago that made that argument obsolete. We used to be like 80% agriculture workers. Modern technology has redu

      • Our economy is growing and it needs a money supply to function. The problem is we printed it and we hand it 10.5 trillion, half of that is tax cuts and the other half is just straight up here have some money, to the top 1%.

        They then took that money and used it to buy up all their competitors.

        Capitalism without competition is just techno-fuelism.
      • More recently they were letting bonds roll off their balance sheets, also known as QT, the opposite of QE which was done during the pandemic. They had too, there was way too much cash sloshing around. They also have a few other tools like reverse repo to make sure overnight cash is not too scarce. The economy has alot of hidden pipes that are essential to keeping the spigots from running dry.

    • For example in the Kroger/Albertson's merger they did a full discovery and found emails where the guys running the merger talked about how they were selling 500+ stores to get approval for the merger, but selling them to a company they knew wasn't up to the task and would sell them right back in a year or two. .

      Link? I just went through (quickly) the FTC complaint with a special focus on their concerns about C&S being handle the load after the sale. There is one quote from a C&S exec, but I can't find any quoted emails from the Korger/Albertson's side.

      • https://www.cincinnati.com/sto... [cincinnati.com]

        It's painfully obvious from those emails that they don't intend to sell to anyone who can actually run the grocery stores and compete with them. This was used in the trial and it's a big part of why the merger is unlikely to go through.

        Usually this kind of discovery just isn't done so that the merger can be rubber stamped. Biden's department of Justice is dead serious about antitrust law enforcement

        • Re: (Score:2)

          by jonwil ( 467024 )

          I wonder how much money Kroger and Albertsons are donating to the Trump campaign...

        • https://www.cincinnati.com/sto... [cincinnati.com]

          It's painfully obvious from those emails that they don't intend to sell to anyone who can actually run the grocery stores and compete with them. This was used in the trial and it's a big part of why the merger is unlikely to go through.

          Anyone else actually read the linked article?

          1. They weren't emails. They were texts.
          2. The texts had nothing to do with the current proposed merger and sale of stores to C&S. .
          3. The texts were not between anyone working for a company that is selling stores in the current merger.

          They were texts between two employees of C&S about stores they were going to buy back in 2021 No Krogers personnel. No Albertsons personnel.

          I just spot checked four of the twelve stores that C&S did buy then. Al

    • In any case there's no indication the rate hikes helped inflation.

      In this case the rate hikes helped increase inflation. Companies claimed they were raising wages (they really weren't, but that's another story) which meant they had to raise prices on their goods and services. That got picked up by the Fed which then raised rates to supposedly slow inflation, but as Powell has stated, his real intention was to cause people to lose their jobs [cbsnews.com].

      This increase in rates then allowed companies to raise t

      • This comes across as unfounded certainty. The claims don't match observation either; I think perhaps its conflating inflation rate with price level. The Fed is accurate in their statement: Inflation rate has definitely dropped. Price level hasn't dropped, and the Fed hasn't claimed it has (and in fact the Fed doesn't want the price level to drop).

        High interest rates don't generally cause companies to raise their prices. Companies do use any excuse to raise their prices, and they will do so until their sal

        • I think perhaps its conflating inflation rate with price level.

          No, that's not what I said. Maybe I wasn't clear enough. In my last paragraph I said:

          The Fed claiming inflation is coming down is demurement. Inflation may not be rising as much as it was, but the soaring prices companies foisted on us are still in place.

          By demurement I mean claiming inflation is coming down while not acknowledging how high prices are. They only look at the inflation figure, not the overall picture.

          The Fed doesn't live in reality. To them it's all about the numbers. "Oh look, inflation is only 3%. We can cut rates." Which completely ignores the 50% increase in some food prices (pota

          • Which completely ignores the 50% increase in some food prices (potato chips for example) or the double digit rise in housing prices, or the meager salary inceases which haven't kept pace with the inflation rate of the past few years.

            Those price increases don't matter as much if wages go up accordingly. And your claim that wages aren't keeping pace is simply wrong. For the last year or so, wage growth has been outpacing inflation: https://www.statista.com/stati... [statista.com]

            And the cumulative charts seem to have th

  • Inflation is low. Interest rates are dropping. Harris has a growing lead in the polls. Hezbollah members are dying or being crippled for life. Yesterday was the Moon Festival, so we have treats.

    • Re: (Score:3)

      by Rujiel ( 1632063 )

      "Inflation is low."

      It blows my mind that people can still be wound up like little automatons to believe this, in spit of the evidence of their own eyes

      • Re:It's a great week! (Score:5, Informative)

        by TheMiddleRoad ( 1153113 ) on Wednesday September 18, 2024 @03:18PM (#64797131)

        Inflation happened thanks to the CCP flu disrupting the economy. Now things are back to normal. Prices are higher, but they're not rising like they were, which means inflation is low again.

        • Re: (Score:3)

          by Rujiel ( 1632063 )

          First, it's silly to call it the "CCP flu" when your own country originated it and moved the work to China after gain of function research was supposedly halted in 2014. https://www.science.org/conten... [science.org]

          Second, what you are talking about is not inflation, it is the change in inflation. But in both cases the numbers are a contrived pack of lies, just like unemployment rates and the establishment jobs report that is comically redacted retroactively on the regular now.

          • Second, what you are talking about is not inflation, it is the change in inflation

            Incorrect. The "change in inflation" is that it went from ~9% to the current ~3%. Inflation is at 3%, which is low, relatively. The level of current cost/prices is not inflation. It's the cumulative result of inflation. Prices are higher than they were 2 years ago, inflation is lower than it was 2 years ago.

          • Keep swallowing the lies, bro. The failed CCP murdered millions across the world. Typical commie slaughter of innocents.

  • I'm betting this means more transitory inflation [youtube.com] coupled with another Inflation Reduction Act. The last round was a roaring success at tangibly increasing human suffering [theconversation.com] so why not repeat the same folly [youtube.com]?

    • Inflation had world-wide causes. No one nation "broke prices". First, factories were shut down or scaled back in many countries due to the pandemic. Different nations recovered from the pandemic at different rates, so some wanted products that were now scarce, so prices for them naturally went up (Econ 101).

      Others didn't want to pay the high price so instead shopped for other products. But when everyone is doing this at the same time, ALL prices go up, not just those tied to closed factories. It's kind of l

  • The cut is already priced in, market didn't do much. Heard this on Bloomber; I agree. Yes like others have said, it should have been done in July.
  • So they subtle signaled that more will come before the year ends, how low will it go? Prices sure have not decreased despite inflation being "steady"

    • Prices cannot decrease unless the inflation rate goes negative.

      They wont allow it to go negative, as it hurts all debt holders, inflating the interest they have to be on their overleveraged holdings.
      This goes for the governements servicing of the debt as well.

      The reason there is a target of 2% for the inflation rate, is to steal as much productivity and purchasing power from the plebs without causing a revolution.
      But we are inching towards that anyways as the debt is unsustanable.

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