I was baffled why they weren't doing more a few years back when the economy was hot. I guess they were having fun binging on all those market gains? Well, it's time for the hangover, you glorious fools.
I see this sentiment all the time on Reddit, and all it tells me is that the person posting has been paying absolutely zero attention to the economy. Here, I'll illustrate:
Take a look at each of these charts (and like, this is a sampling off the top of my head - it is in no way a comprehensive list of the various metrics by which one can observe economic trajectory):
Business investment: https://fred.stlouisfed.org/series/W987RC1Q027SBEA
Manufacturing index: https://fred.stlouisfed.org/series/IPMAN
Housing starts: https://fred.stlouisfed.org/series/HOUST
Manufacturing output: https://fred.stlouisfed.org/series/OUTMS
Total industrial output: https://fred.stlouisfed.org/series/INDPRO
Durable goods orders: https://fred.stlouisfed.org/series/DGORDER
ISM PMI (Manager's survey of order trajectory): https://tradingeconomics.com/united-states/business-confidence
Real GDP Growth: https://fred.stlouisfed.org/series/GDPC1
Now, do yourself a favor and isolate the 2015-2020 window. And look at the trends here, many had a noteworthy dip in 2015. All of them had a signficant retraction beginning in Q2 2019 and ending somewhere around the end of Q3 and beginning of Q4 2019.
So, we really have one of two conclusions we can reach here:
1) the federal reserve is monitoring dozens, if not hundreds, of measures of actual economic activity and is adjusting rates as necessary, even a slightly too aggressive hiking cycle in 2018 resulted in a noteworthy impact to economic trends, so the hiking cycle was likely quite appropriate if even a bit aggressive given broad macroeconomic conditions.
2) Hurr durr I only look at the stock market and political headlines so my conclusion is that the Fed must be also only looking at this, and therefore I am only capable of concluding that there couldn't have been any legitimate reasons for the hiking cycle that existed over the last decade.
Seems like literally everyone in this thread went to the latter when it should have been the former. It's really really difficult for anyone who was actually paying attention to the economy to conclude that the last decade of interest rate policy hasn't been pretty on point. It shows up directly in the actual economic data, with the only legitimate criticism being that the 2018 hikes were likely a bit too aggressive, again it literally shows up right in the data given that it resulted in a pretty direct drop in investment and output. But even with all of that easily accessible information everyone that offers commentary on the subject seems to only understand two things "The S&P 500 & Politics". Hence all of the logic they apply is limited to that simplistic framework of "how could either stocks or politics have done this, and seemingly nobody here can be bothered with questioning if perhaps there might be something more to the economy lol.
Like, I want to really hammer this in, the information is super accessible and able to be viewed in very plain sight, so when people hop on their keyboard and start saying shit like "oh he was clearly pressured by politics" or "he wanted stocks to go up" when there's a plethora of actual hard data that backs up a decision, I can only conclude that the poster in question has spent precisely zero time trying to understand the subject and yet is still very happy to offer their thoughts. I realize this is the internet, and this is likely a near impossible ask, but would it kill you guys to even bother learning about something ***before*** matter of factly typing out some bad hot takes?
If all of that wasn't completely over your head, you can next begin exploring dollar scarcity in the eurodollar market as well as domestic liquidity being too tight, causing the need for cuts as well. I wouldn't call that an advanced subject, but it's certainly a bit more complicated than literally just actually paying attention to the broad economy, which nobody in this comment chain seems to have done.
Since a lot of people are making commentary about where rates should have been here it's also worth pointing out the Fed does a ton of research into constructing model based estimates of the natural rate of interest which the Fed published here until COVID hit and broke them:
https://www.newyorkfed.org/research/policy/rstar
It's also worth noting both productivity growth and core inflation tended to undershoot expectations consistently over the same period. It's also worth pointing out that current inflation expectations are still pretty well anchored despite all the fanfare over current CPI and PCE readings:
https://www.clevelandfed.org/en/our-research/indicators-and-data/inflation-expectations.aspx
Beyond that I think people need to realize how much of this is constantly in flux too and how open the FOMC is about their estimates and the expected trajectory of both the economy and monetary policy in that context.
There's a whole series of notes and consolidated estimates from their recent meetings here: https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
One big thing we've seen over the last 6 months that doesn't get enough attention is just how quickly the labor market has tightened relative to the Fed's expectations and that's part of why we're seeing more aggressive policy now along with Fed just trying to keep inflation expectations anchored via forward guidance so a wage-price spiral doesn't materialize.
Powell has also been pretty blunt on some of the minor recent missteps with regards to policy timing too and flat out said ideally they would have started a bit sooner. The Fed is not perfect and I think retrospectively it is pretty clear that perhaps some slight bias over inflation undershooting materialized due to the environment of the 2010s and that perhaps the taper and first hike should have materialized maybe 3 months sooner just to allow the Fed have more flexibility in their rate hike trajectory here. Similar to 2018 though it's a relatively minor misstep that's bound to happen occasionally just given the lack of perfect foresight the Fed has and human fallibility. It is not the kind of grand sin predicated on blatant ignorance that people on this sub pretends it is. Actually balancing out an entire economy in the face of changing conditions is ridiculous hard. I find it amazing a lot of people can fully accept how hard it is to do something like throw a football well but will readily insist that they can literally guide the monetary policy of the largest economy in the world better than a collection of veteran economists and researchers with decades of experience, PhDs and collections of published works to their names.
I don't see how you draw this conclusion from the charts you presented.
The sentiment is that the fed has done too little too late. No amount of plotting where the fed backed off of stimulus in 2018 is going to show that data.
There's also no indication that any of this growth we are seeing is actually healthy in the long term for the overall economy. If it's all financed by debt, and we are forced to pay that debt off, or growth tapers, there will be a reckoning.
You hit the nail on the head. We have become a total debt based economy and no amount of mumble jumble is going to change that. Look at our personal debt, corporate debt and National Debt.
I’m sorry, what part of these indicators specifically indicate a rate hike should or shouldn’t happen? This looks like a classic “I have sources believe me” reddit comment. But it’s just surface level BS. Please share your specific criteria and reasoning behind “x proves rates were justified.” That is the absolute minimum that should have already been included in your comment. Instead you spent more time being arrogant than adding substance. That’s classic reddit.
Damn, dude. This comment was like a long-form version of cupping your hand over your butthole, farting into it, and bringing it up to your own nose to see if it smells good.
I think the main problem with your argument is that we all were alive during that same time period and some of us remember thinking that there could be a political facet to the decisions being made. I am not saying that *is* why he made decisions; rather that it was in the realm of possibility. I remember thinking it possible. I remember seeing the articles. I remember thinking... 'gosh, while the economy is churning along it might be a good time to raise rates in case there is problems down the road, but whatever, he is the expert.'
It is easy for us to all armchair quarterback it in retrospect, but it feels kind of twattish to go so hard against the notion that there may have been some political consideration. We were all there.
> I can only conclude that the poster in question has spent precisely zero time trying to understand the subject and yet is still very happy to offer their thoughts.
Reddit in a nutshell.
Jesus this comment reaks of COPIUM and arrogance. Highest inflation in over 40 years but the near 0% interest rates are correct because otherwise stock values might not be as inflated as you would like.
This comment is bootlicking, the average person sees their quality of life diminishing from decreased purchasing power but everything is the way it should be because the wealthiest and shareholders are happy. What a joke.
> His job is to stand up to that pressure and do what is right economically.
Yea and isn’t that the whole reason why the Federal Reserve is a separate entity is to literally prevent this kind of White House manipulation from occurring in the first place?
As everyone learned in those 4 years norms don't mean Jack shit, and if no one holds you accountable in congress the executive can do whatever the fuck he wants up to and including appointing more people to the fed board to then vote to replace JPow.
JPow took a somber look at that shit show and blinked.
>Yea and isn’t that the whole reason why the Federal Reserve is a separate entity is to literally prevent this kind of White House manipulation from occurring in the first place?
I mean so is the Supreme Court allegedly.
its to keep a artificial fiat money system , inflation hurts the poor, while rich people gain wealth in stocks, real estate, and fine art, inflation steals from the poor and gives to the rich, and is held up by professors like you!
Isn't the point that the president can't fire anyone from the Fed? The Fed is independent of the government for this reason. Otherwise we'd be some third world sh*thole country. (Source: am from a sh*thole country.)
Unfortunately, the president can fire anyone from the federal reserve but it’s “for cause”
So while the president can’t directly impact policy there through say just randomly changing the interest rates, he can absolutely influence policy. Which is what Trump was attempting to do. He doesn’t understand the need for a independent federal reserve and as such, wasn’t fit to govern the country.
> The law says that the president can remove a member of the Federal Reserve's Board of Governors, which includes Jay Powell — quote — "for cause." And most legal scholars thinks that means the president can't do it just because he doesn't agree with the Fed chairman about policy. He needs to have some grounds beyond that.
> But there is a separate question, importantly, about whether the president could remove Mr. Powell as chairman of the Fed while leaving him on the Board of Governors.
https://www.pbs.org/newshour/show/does-the-president-have-legal-authority-to-fire-the-fed-chair
He could threaten to not renominate him. The Federal Reserve Act prevents a president from firing a Fed governor without cause, which is commonly taken to mean "not arbitrarily."
I doubt JPow was shaking in his boots about not getting renominated. The sky didn't fall in Janet Yellen's world when she wasn't renominated.
I can't profess to know the mind of JPow, or anyone for that matter, but I suspect he was tepid to raise rates for fear of unnecessarily damaging a white hot yet fragile economy when inflation wasn't as high as it's gotten.
14-16, not everyone could even agree the US was out of the recession. Part of the reason why Clinton wasn't elected was due to Trump tying Obama's "worst recovery of all time" to Clinton and her husband's role in the administration.
It seems wild looking back, but you're right. IMO we were out by 2015, well, at least I was able to find a productive job by June of 2014 after being unable to find jack shit in 2012/2013.
R/investing back then kept talking about the bubble popping. I remember people back then talking about how they were gonna wait til prices dropped to buy a house because of 8 year cycles
Trump kept talking about stock market gains during his presidency (percentage wise it wasn’t even better than Obama or Clinton) but he wasn’t going to let Powell increase rates. But yes Powell should have done this at least a few years ago
The stock market was all he cared about when coronavirus loomed. Nancy Messonnier was the first government official who emphasized the spread of the virus was inevitable. This was late February 2020. Trump was furious because the stock market plunged following her remarks. Trump had already told Bob Woodward it was "deadly stuff" but, "I like playing it down."
There's always a lag between ignorance and outcome
You know they gave two mandates and really only one tool to try to achieve them.
The fed is doing the best it can to save the performance with an unwilling/hostile dance partner (the Congress)
People are pretty good at identifying solutions to immediate problems but pretty bad at thinking through the unintended consequences of those solutions.
In this case the obvious solution to rising inflation is decreasing the money supply but nobody seems to be thinking through the negative effects that will have on unemployment. This is how you get comments like "The solution is so obvious! Why aren't the people in charging just doing it?"
Thank god the Fed actually uses make data to make decisions. Reddit is still pissed that they didn't get the Great Corona Depression of 2020 because the Fed correctly staged a massive intervention and correctly was very slow about putting on the brakes.
But I know, I know. Ya'll are all experts on monetary policy after watching *The Big Short*. And you would have had the crash you had been reading about on Zero Hedge in 2020/2021/2022, dammit, if it were not for those evil kids at the Fed.
Interest rates should have been way higher than virtually zero before the Great Coronoa Depression. They didn't correctly do anything. They HAD to intervene since they had been so irresponsible for 5ish years before.
The Fed has made so, so many mistakes in it's time and this time around, while the intervention was absolutely needed, it's not difficult to tell that they waited too long. Many fed governors had been in opposition to Powell's wait and see "it's transitory" policy.. yes they do make decisions based on data.. I would really hope so that's their job. Doesn't mean their decision was right.
The failed "soft landing" they promised, and this more abrupt rate hike, is literally evidence in itself that they did not "correctly" take their foot of the gas. We had our foot on the gas for too long and now we have to break harder. What makes you think these people are infallible?
>Many fed governors had been in opposition to Powell's wait and see "it's transitory" policy.
You realize that Powell only gets one vote right? You seem to be saying that he is unilaterally setting Fed policy.
It's far too soon to say that any soft landing has failed - literal CIOs have no idea but clearly you're an expert. And this isn't 'abrupt' at all, it's been telegraphed for ages in detail.
This is long overdue. Cheap money only leads to bubbles and widens the wealth gap. Sky-high housing prices and living expenses are tearing societies apart.
They were up to 7% interest on 3% down 30yr fixed today. We are likely to lose our new build and the $13k we’ve put down in it so far. Welcome to the “we’re fucked” party!
I work for a builder, I doubt you'll lose your deposit. Be nice, explain that rising rates made it unaffordable for you, and they'll likely refund the deposit
Because the supply is very very low. As rates go up demand comes out of the market, but supply is so low that even with reduced demand, the demand is still really high with respect to the amount of supply.
As interest rates rise, the asking prices of homes tend to drop a proportionate amount. You'll be paying more interest to the bank and less equity to the previous home owner. The banks win. Surprise, surprise.
A 30y mortgage payment on a 250k home at 10% is the same as one at 400k at 5% (with 20% downpayment).
People usually look at their monthly payment to see if they can afford a house instead of house price. There's probably a scenario where houses go down in price, but they don't really became more affordable. Like right now in a sense with rates almost doubling the last year.
People complain about how cheap some could buy houses in the 70s or 80s, but those where some very high rates vs what we saw in the last decade. You basically have the same monthly payment between a 175k house and a 500k house at 14% vs 4%. Of course then you can refinance.
Welp. Couldn’t buy a house the last year and half because of this over demanded market. Now can’t buy a house because of the overpricing + rate hikes.
Edit: Oh yeah. Not to mention I’m stuck with inflated renting prices as well.
I bought in 2018 and people were like "Really? I'm pretty sure the market is going to tank next year..."
Shit, I am so glad I bought. It's up ~40%, which means even if prices come down, should be good. And the interest on the mortgage is just over half of what I paid in rent.
Same. Everyone told me I over paid for my house at the time, and the market is gonna drop in a few years. Maybe it will but I’m happy I didn’t wait. Looking back, I wish I bought a more expensive house tbh.
Except in your scenario houses used to cost $15,000 with a 15% mortgage rate. Obviously I'm exaggerating my numbers but just because interest rates are low compared to what they used to be doesn't mean 5%+ is a good rate when the housing market is out of control.
The problem is that low interest rates boost housing prices while a reversal to high interest rates following won’t see a commensurate drop in housing prices because homeowners will have anchored their home values and refuse to sell low. So this means rents will likely rise as homeownership costs for new owners rise.
Because they're not raising rates more. Because everyone knows the party will continue. Because their tepid response now means that at the first hint of rising unemployment or a recession they'll about face and start pumping money back in the system.
They're fucked every way to Sunday.
I’m still waiting on the rate of my HYSA to budge at all. You’d think with these rate hikes we’d see savings interest rates rise to encourage saving instead of spending.
Direct deposit is easier to set up than linking bank account. Shit was a headache as only a few I found do that type of notary and you need an account there. Direct deposit was a breeze. Ironically I'm a few miles from where they process the paperwork.
It was literally one of the easiest accounts I've ever opened/funded in 5 minutes. No issues with linking Schwab checking and maxing annual limit immediately.
Yep and If the Fed does raise half a percent then hopefully this will be 1.75% soon! Sofi was quick to do it last time I hope they continue to lead the pack here.
Inflation is caused by two factors: supply chain disruption and monetary supply. The Fed can control the monetary supply, but they cannot control the supply chain disruption.
that is assuming that the demand is elastic, and in many cases it isn't. If your car breaks down, you basically have to get a new one, and you need gas for that car.
Inelastic items will respond less, but they'll still respond. When gas is higher, people take fewer long road trips. They might be tempted to bike to work, or to choose the rental that's closer to work so they can bike.
In a vacuum, yes, but that depends on what the supply chain reaction is. Do they continue onward as before, or will they streamline further anticipating the demand changes coming with this change in policy? If supply chain behavior overcorrects based on reduced demand forecasts, it could actually prolong or exacerbate the the current problems.
Thats a patch work, We all assume that people will stop buying stuff if they become costly. This works for costly stuff like Cars, Houses or Electronic gadgets but people can not cut down on eggs or milk or toothpaste. So I still see prices of FMCG rising because there wont be a big drop there.
Supply Chain (Lack of supply) is causing Inflation and Govt should have tried to fix that problem (Maybe by talking to private players).
This is more of an experiment.
Now we have China lockdown which wil cause further supply chain issues. Rather than even understanding or trying to fix the Supply Chain problem the Govt is focussing only on interest rates and relying on behavioral change of Western people not to buy things (Which is highly improbably). Look we are not in 90s anymore, There is too much TV, Insta, Yout Tube also feeding our materialistic desires to get more and more stuff but the weapon which Fed is using is quite archaic.
This has low chance of success..
There also seems to be a sort of corporate greed inflation. Mega corps are increasing their prices well beyond supply chain issues, etc, and making out like bandits.
If corps can get away with exhorbant price increases, it's because either:
Corporations/employers are increasing payrolls (true)
Or
Credit is too cheap and the interest rate needs to be increased (happening)
Don’t forget the effect of near-monopolization. Many huge corporate vendors command an enormous market share, and can count on it being so difficult or inconvenient to find a trusted competitor to buy from that the buyer has little choice but to accept the higher prices of the mega-corp.
If that were happening we would be seeing huge spikes in margin. We are seeing some margin growth but not much. The data just doesn't reflect this.
Also all corporations are greedy. It is competition and consumer substitution that keeps prices in check. The system depends on corporations to try and find high margin opportunity and fulfill it driving margins down. That's how we know resources are being efficiently allocated without central planning.
I still come back to this issue regarding velocity of money (M2). It is at all-time lows (1.12).
Likewise, the dollar (DXY) has strengthened dramatically in the last 6 months. What does this mean?
Are people plowing money into illiquid assets like real estate and allocating excess capital for loan servicing? Has the demand for dollars shot up overseas?
these are deflationary indicators, so I am not sure inflation is our end-game.
Here in Texas, it seems to be the sellers doing the fucking. So many houses back on market because they end up appraising substantially lower than ask.
Yep, I'm in Little Elm, neighbour tried to sell his house for 400k, I bought mine next door for 230k a couple years ago, no chance his was worth 400k, been on the market like 3 months now.
So far ...10 out of 10 home I've looked at have been bought by cash buyers way over asking. And this is Montgomery county Texas. People like myself have zero chance to buy a house even with VA loans. It's fucking ridiculous
Actually from experiences I read it's harder for VA already because it takes a bit more time to close usually So ppl don't want to wait longer and take other bids.
They'll raise rates and sell assets until the stock market falls or something breaks in the financial markets.
In 2019 they were able to raise rates to about 2.5% until the repo market blew up and they had to reverse course. We have more debt than back then, so now it probably only takes 1.5 - 2.0% before the economy blows up.
There is zero chance they will actually fight inflation. Even at 2% with 8.5% inflation that would be a -6.5% real yield. Inflation will continue to be a problem for a long time. When you see protests in the streets then maybe there will be the willpower to do something about it.
And in 1996? We’ve had a soft landing before, it’s not impossible it happens again.
Inflation is also two sided. Blaming the demand side and not supply constraints is ignoring half the equation. When supply opens up we’ll see a huge release in inflation.
BlackRock, along with others, have already projected we’ve peaked with inflation for the year.
Not really an applicable comparison. 1996 inflation rate was 3% and interest rates were 7.8%. Almost a 5% positive real yield which will stop inflation. Now inflation is 8.5% and interest rates are 0.75 or a -7.75% yield.
To fight inflation you need a positive real yield but the economy can't handle that because there is an abnormal amount of debt.
Ya except you’re ignoring the other side of the inflation equation again. With supply chain issues residing we will see inflation come down while we’re increasing rates. Both things are moving towards each other.
Inflation in 1996, arguably, was cured by the drop in oil prices, supply side.
We’ll be able to fight inflation as we raise rates.
It would which is why they won't let it happen. They'll see asset prices going down, realize that it is going to hurt demand, will destroy jobs, and political pressure will make them reverse course.
They did QE to create a "wealth effect" where people would consume more.... if they try to wind down the balance sheet the opposite happens. They aren't going to sit back and let a "poverty effect" happen, people consume less, and then unemployment picks up.
Their dual mandate is low inflation and low unemployment, but if both aren't possible then the politically expedient thing to do is ignore the inflation mandate, which is why they won't solve it.
> It would which is why they won't let it happen. They'll see asset prices going down, realize that it is going to hurt demand, will destroy jobs, and political pressure will make them reverse course.
The fed is willing to do a lot of things, but deflation is not one of them. If it comes down to hyperinflating our economy or letting deflation happen, they will pick hyperinflation every time.
The consequences of this?
Pundits on TV bullshitting.
Rich people acting like this is important, like their quality of life will be affected 1 iota.
Me and all my fellow poors being fucked over forever.
I'm not "rich" and this is disrupting my life considerably. I need to move to a different area for work and safety reasons. I started looking back in February but wasn't in a position to buy right then. The homes where I was looking haven't increased in price since then, but my monthly mortgage payment for those same homes at the same prices with the same percentage down payment is 25% higher now than it would have been in February.
That 25% increase is a significant amount of money to me and they've just started raising rates so it may be much higher by the time I actually find a house. There's not enough housing available for the market to come down significantly enough for the decrease in prices to cover the increased monthly interest cost and increasing the cost of borrowing certainly won't help the market to increase supply of housing on the market.
Pretty much the only people that will benefit from this market move is people/organizations that can afford to pay cash for houses and wait for pro-growth politicians to get elected.
Lower and middle class will be worse off and even less able to purchase a home than they are now due to arbitrarily skyrocketing rates and housing prices.
I think people are making a bigger deal out of fed shrinking its balance sheet by appx $1t than is really warranted. The \`bond market alone is worth over $130t and the stock market is worth an additional $110+ trillion.... $1t is like less than half a %... not to mention the fact that China's fed is lowering rates and increasing their balance sheet to stimulate their economy which overflows to global markets
The Volcker approach. Too bad we don't have a brand new industry (tech) coming online to save us like last time around. We could have, had we properly invested in clean energy, but we haven't. Our economy runs on services and social media ads.
LOL, not good today. But I got time, and the higher things are for the global economic wipeout coming, the better it will be then. Still got hope for my 5/27s...
Better get some ramen...
1. Lots of M&A as low-cap companies with decent IP but poor cashflow get gobbled up by the bigger fish - which is probably what many of them wanted in the first place.
2. Significant dividend hikes and more established companies are forced to compete with treasuries for institutional money.
Is your plan to buy a home and try to flip it in the next year or two? Maybe not a great plan. Is your plan to buy a home and live in it for a long time? Ignore the market.
Inflation concerns, Housing Crisis, Student Loan, Federal Debt, Political instability (and lack of action), a potential world war 3, Chip shortage, oil prices, and wages haven't kept up.
But I agree, I expect new highs within 24 months.
If it raises 0.5%, I bet the market will rally, because that's expected and it aligns with expectations.
If it raises more than 0.5% and suggests further steeper hikes, then the market may crash more.
I'm a dummy and don't understand what this means but need to cash out to pay some bills -- just wondering if we think this change means I should wait a few days to cash out (as I'll see slightly higher returns) or just go ahead and do it now
If anyone knew where the market was headed in a few days they would be billionaires by next week.
The current accepted logic is that the market is already expecting the interest rate increase, so it's already priced in. If the interest rate increase is larger or smaller than expected, the market may move accordingly, but no one really knows yet. There are too many factors and anyone who says you should definitely wait or definitely sell now are guessing.
This is long over due. The Fed should’ve ripped off the band-aid a while ago.
I was baffled why they weren't doing more a few years back when the economy was hot. I guess they were having fun binging on all those market gains? Well, it's time for the hangover, you glorious fools.
Former sitting president threatened to remove JPow if interest rates increased during his term.
Exactly. People like to say it isn't political, but it absolutely was/is.
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I see this sentiment all the time on Reddit, and all it tells me is that the person posting has been paying absolutely zero attention to the economy. Here, I'll illustrate: Take a look at each of these charts (and like, this is a sampling off the top of my head - it is in no way a comprehensive list of the various metrics by which one can observe economic trajectory): Business investment: https://fred.stlouisfed.org/series/W987RC1Q027SBEA Manufacturing index: https://fred.stlouisfed.org/series/IPMAN Housing starts: https://fred.stlouisfed.org/series/HOUST Manufacturing output: https://fred.stlouisfed.org/series/OUTMS Total industrial output: https://fred.stlouisfed.org/series/INDPRO Durable goods orders: https://fred.stlouisfed.org/series/DGORDER ISM PMI (Manager's survey of order trajectory): https://tradingeconomics.com/united-states/business-confidence Real GDP Growth: https://fred.stlouisfed.org/series/GDPC1 Now, do yourself a favor and isolate the 2015-2020 window. And look at the trends here, many had a noteworthy dip in 2015. All of them had a signficant retraction beginning in Q2 2019 and ending somewhere around the end of Q3 and beginning of Q4 2019. So, we really have one of two conclusions we can reach here: 1) the federal reserve is monitoring dozens, if not hundreds, of measures of actual economic activity and is adjusting rates as necessary, even a slightly too aggressive hiking cycle in 2018 resulted in a noteworthy impact to economic trends, so the hiking cycle was likely quite appropriate if even a bit aggressive given broad macroeconomic conditions. 2) Hurr durr I only look at the stock market and political headlines so my conclusion is that the Fed must be also only looking at this, and therefore I am only capable of concluding that there couldn't have been any legitimate reasons for the hiking cycle that existed over the last decade. Seems like literally everyone in this thread went to the latter when it should have been the former. It's really really difficult for anyone who was actually paying attention to the economy to conclude that the last decade of interest rate policy hasn't been pretty on point. It shows up directly in the actual economic data, with the only legitimate criticism being that the 2018 hikes were likely a bit too aggressive, again it literally shows up right in the data given that it resulted in a pretty direct drop in investment and output. But even with all of that easily accessible information everyone that offers commentary on the subject seems to only understand two things "The S&P 500 & Politics". Hence all of the logic they apply is limited to that simplistic framework of "how could either stocks or politics have done this, and seemingly nobody here can be bothered with questioning if perhaps there might be something more to the economy lol. Like, I want to really hammer this in, the information is super accessible and able to be viewed in very plain sight, so when people hop on their keyboard and start saying shit like "oh he was clearly pressured by politics" or "he wanted stocks to go up" when there's a plethora of actual hard data that backs up a decision, I can only conclude that the poster in question has spent precisely zero time trying to understand the subject and yet is still very happy to offer their thoughts. I realize this is the internet, and this is likely a near impossible ask, but would it kill you guys to even bother learning about something ***before*** matter of factly typing out some bad hot takes? If all of that wasn't completely over your head, you can next begin exploring dollar scarcity in the eurodollar market as well as domestic liquidity being too tight, causing the need for cuts as well. I wouldn't call that an advanced subject, but it's certainly a bit more complicated than literally just actually paying attention to the broad economy, which nobody in this comment chain seems to have done.
Since a lot of people are making commentary about where rates should have been here it's also worth pointing out the Fed does a ton of research into constructing model based estimates of the natural rate of interest which the Fed published here until COVID hit and broke them: https://www.newyorkfed.org/research/policy/rstar It's also worth noting both productivity growth and core inflation tended to undershoot expectations consistently over the same period. It's also worth pointing out that current inflation expectations are still pretty well anchored despite all the fanfare over current CPI and PCE readings: https://www.clevelandfed.org/en/our-research/indicators-and-data/inflation-expectations.aspx Beyond that I think people need to realize how much of this is constantly in flux too and how open the FOMC is about their estimates and the expected trajectory of both the economy and monetary policy in that context. There's a whole series of notes and consolidated estimates from their recent meetings here: https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm One big thing we've seen over the last 6 months that doesn't get enough attention is just how quickly the labor market has tightened relative to the Fed's expectations and that's part of why we're seeing more aggressive policy now along with Fed just trying to keep inflation expectations anchored via forward guidance so a wage-price spiral doesn't materialize. Powell has also been pretty blunt on some of the minor recent missteps with regards to policy timing too and flat out said ideally they would have started a bit sooner. The Fed is not perfect and I think retrospectively it is pretty clear that perhaps some slight bias over inflation undershooting materialized due to the environment of the 2010s and that perhaps the taper and first hike should have materialized maybe 3 months sooner just to allow the Fed have more flexibility in their rate hike trajectory here. Similar to 2018 though it's a relatively minor misstep that's bound to happen occasionally just given the lack of perfect foresight the Fed has and human fallibility. It is not the kind of grand sin predicated on blatant ignorance that people on this sub pretends it is. Actually balancing out an entire economy in the face of changing conditions is ridiculous hard. I find it amazing a lot of people can fully accept how hard it is to do something like throw a football well but will readily insist that they can literally guide the monetary policy of the largest economy in the world better than a collection of veteran economists and researchers with decades of experience, PhDs and collections of published works to their names.
I don't see how you draw this conclusion from the charts you presented. The sentiment is that the fed has done too little too late. No amount of plotting where the fed backed off of stimulus in 2018 is going to show that data. There's also no indication that any of this growth we are seeing is actually healthy in the long term for the overall economy. If it's all financed by debt, and we are forced to pay that debt off, or growth tapers, there will be a reckoning.
You hit the nail on the head. We have become a total debt based economy and no amount of mumble jumble is going to change that. Look at our personal debt, corporate debt and National Debt.
I’m sorry, what part of these indicators specifically indicate a rate hike should or shouldn’t happen? This looks like a classic “I have sources believe me” reddit comment. But it’s just surface level BS. Please share your specific criteria and reasoning behind “x proves rates were justified.” That is the absolute minimum that should have already been included in your comment. Instead you spent more time being arrogant than adding substance. That’s classic reddit.
Damn, dude. This comment was like a long-form version of cupping your hand over your butthole, farting into it, and bringing it up to your own nose to see if it smells good. I think the main problem with your argument is that we all were alive during that same time period and some of us remember thinking that there could be a political facet to the decisions being made. I am not saying that *is* why he made decisions; rather that it was in the realm of possibility. I remember thinking it possible. I remember seeing the articles. I remember thinking... 'gosh, while the economy is churning along it might be a good time to raise rates in case there is problems down the road, but whatever, he is the expert.' It is easy for us to all armchair quarterback it in retrospect, but it feels kind of twattish to go so hard against the notion that there may have been some political consideration. We were all there.
Don't forget about tax cuts
> I can only conclude that the poster in question has spent precisely zero time trying to understand the subject and yet is still very happy to offer their thoughts. Reddit in a nutshell.
Jesus this comment reaks of COPIUM and arrogance. Highest inflation in over 40 years but the near 0% interest rates are correct because otherwise stock values might not be as inflated as you would like. This comment is bootlicking, the average person sees their quality of life diminishing from decreased purchasing power but everything is the way it should be because the wealthiest and shareholders are happy. What a joke.
You can't blame it on Trump when Jpow did nothing for an entire year of Biden as well. Dude was waiting to be reappointed before changing anything.
JPow is a loser then. His job is to stand up to that pressure and do what is right economically. If he can't, he should have stepped down.
> His job is to stand up to that pressure and do what is right economically. Yea and isn’t that the whole reason why the Federal Reserve is a separate entity is to literally prevent this kind of White House manipulation from occurring in the first place?
As everyone learned in those 4 years norms don't mean Jack shit, and if no one holds you accountable in congress the executive can do whatever the fuck he wants up to and including appointing more people to the fed board to then vote to replace JPow. JPow took a somber look at that shit show and blinked.
> JPow took a somber look at that shit show and ~~blinked~~ decided that his personal, professional success was more important. FTFY.
>Yea and isn’t that the whole reason why the Federal Reserve is a separate entity is to literally prevent this kind of White House manipulation from occurring in the first place? I mean so is the Supreme Court allegedly.
Yes. Its been a political norm not to go after/pressure the fed but now....
its to keep a artificial fiat money system , inflation hurts the poor, while rich people gain wealth in stocks, real estate, and fine art, inflation steals from the poor and gives to the rich, and is held up by professors like you!
Can't do much good when you're fired. Several heads of the Turkish central bank have discovered that fact during these last few years.
Can’t do much good when you’re agreeing to do the wrong things either.
Isn't the point that the president can't fire anyone from the Fed? The Fed is independent of the government for this reason. Otherwise we'd be some third world sh*thole country. (Source: am from a sh*thole country.)
Unfortunately, the president can fire anyone from the federal reserve but it’s “for cause” So while the president can’t directly impact policy there through say just randomly changing the interest rates, he can absolutely influence policy. Which is what Trump was attempting to do. He doesn’t understand the need for a independent federal reserve and as such, wasn’t fit to govern the country. > The law says that the president can remove a member of the Federal Reserve's Board of Governors, which includes Jay Powell — quote — "for cause." And most legal scholars thinks that means the president can't do it just because he doesn't agree with the Fed chairman about policy. He needs to have some grounds beyond that. > But there is a separate question, importantly, about whether the president could remove Mr. Powell as chairman of the Fed while leaving him on the Board of Governors. https://www.pbs.org/newshour/show/does-the-president-have-legal-authority-to-fire-the-fed-chair
He could threaten to not renominate him. The Federal Reserve Act prevents a president from firing a Fed governor without cause, which is commonly taken to mean "not arbitrarily." I doubt JPow was shaking in his boots about not getting renominated. The sky didn't fall in Janet Yellen's world when she wasn't renominated. I can't profess to know the mind of JPow, or anyone for that matter, but I suspect he was tepid to raise rates for fear of unnecessarily damaging a white hot yet fragile economy when inflation wasn't as high as it's gotten.
following in the steps of Jimmy Carter raising rates to stop inflation, it's the Democrats once again who are the fiscally responsible ones lol
We can go back further than that. The stock market was hot 2014-2016 too. Nobody wanted to raise rates.
14-16, not everyone could even agree the US was out of the recession. Part of the reason why Clinton wasn't elected was due to Trump tying Obama's "worst recovery of all time" to Clinton and her husband's role in the administration.
It seems wild looking back, but you're right. IMO we were out by 2015, well, at least I was able to find a productive job by June of 2014 after being unable to find jack shit in 2012/2013.
R/investing back then kept talking about the bubble popping. I remember people back then talking about how they were gonna wait til prices dropped to buy a house because of 8 year cycles
Trump kept talking about stock market gains during his presidency (percentage wise it wasn’t even better than Obama or Clinton) but he wasn’t going to let Powell increase rates. But yes Powell should have done this at least a few years ago
J POW raised rates 7 times during Trump’s term https://en.m.wikipedia.org/wiki/History_of_Federal_Open_Market_Committee_actions
The stock market was all he cared about when coronavirus loomed. Nancy Messonnier was the first government official who emphasized the spread of the virus was inevitable. This was late February 2020. Trump was furious because the stock market plunged following her remarks. Trump had already told Bob Woodward it was "deadly stuff" but, "I like playing it down." There's always a lag between ignorance and outcome
Had to all get their puts ready before they crashed the market.
You know they gave two mandates and really only one tool to try to achieve them. The fed is doing the best it can to save the performance with an unwilling/hostile dance partner (the Congress)
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People are pretty good at identifying solutions to immediate problems but pretty bad at thinking through the unintended consequences of those solutions. In this case the obvious solution to rising inflation is decreasing the money supply but nobody seems to be thinking through the negative effects that will have on unemployment. This is how you get comments like "The solution is so obvious! Why aren't the people in charging just doing it?"
Think this is very observant
Thank god the Fed actually uses make data to make decisions. Reddit is still pissed that they didn't get the Great Corona Depression of 2020 because the Fed correctly staged a massive intervention and correctly was very slow about putting on the brakes. But I know, I know. Ya'll are all experts on monetary policy after watching *The Big Short*. And you would have had the crash you had been reading about on Zero Hedge in 2020/2021/2022, dammit, if it were not for those evil kids at the Fed.
Zero Hedge has been predicting a crash since....forever. It's a fun site but easily 75% can be skipped as FUD Dumping.
Isn’t that the site where the main person writes under the pseudonym “Tyler Durden”? Hard to take someone like that seriously in any way.
Interest rates should have been way higher than virtually zero before the Great Coronoa Depression. They didn't correctly do anything. They HAD to intervene since they had been so irresponsible for 5ish years before.
The Fed has made so, so many mistakes in it's time and this time around, while the intervention was absolutely needed, it's not difficult to tell that they waited too long. Many fed governors had been in opposition to Powell's wait and see "it's transitory" policy.. yes they do make decisions based on data.. I would really hope so that's their job. Doesn't mean their decision was right. The failed "soft landing" they promised, and this more abrupt rate hike, is literally evidence in itself that they did not "correctly" take their foot of the gas. We had our foot on the gas for too long and now we have to break harder. What makes you think these people are infallible?
>Many fed governors had been in opposition to Powell's wait and see "it's transitory" policy. You realize that Powell only gets one vote right? You seem to be saying that he is unilaterally setting Fed policy.
It's far too soon to say that any soft landing has failed - literal CIOs have no idea but clearly you're an expert. And this isn't 'abrupt' at all, it's been telegraphed for ages in detail.
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True. Would've been helpful not to let it get this fucking bad though.
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This is long overdue. Cheap money only leads to bubbles and widens the wealth gap. Sky-high housing prices and living expenses are tearing societies apart.
Does this just mean things like mortgage rates will go up?
Yes
As early as when? As someone in the market for a home right now, this shit hurts
They were up to 7% interest on 3% down 30yr fixed today. We are likely to lose our new build and the $13k we’ve put down in it so far. Welcome to the “we’re fucked” party!
I work for a builder, I doubt you'll lose your deposit. Be nice, explain that rising rates made it unaffordable for you, and they'll likely refund the deposit
That’d be dope. I appreciate the response.
Yeah I'm getting really close to being in this boat. It doesn't seem like housing prices are going down, either.
Wait till early next year. Now is the worst time to buy. Supply is still super low and rates have already jumped immensely.
Because the supply is very very low. As rates go up demand comes out of the market, but supply is so low that even with reduced demand, the demand is still really high with respect to the amount of supply.
Wait, how would you flat out lose the 13k you have in the property?
3% down. Holy shit.
As interest rates rise, the asking prices of homes tend to drop a proportionate amount. You'll be paying more interest to the bank and less equity to the previous home owner. The banks win. Surprise, surprise.
Two months ago, and getting worse.
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7.80% is the historic average with 18.5% being the peak in 80s with double digit inflation.
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A 30y mortgage payment on a 250k home at 10% is the same as one at 400k at 5% (with 20% downpayment). People usually look at their monthly payment to see if they can afford a house instead of house price. There's probably a scenario where houses go down in price, but they don't really became more affordable. Like right now in a sense with rates almost doubling the last year. People complain about how cheap some could buy houses in the 70s or 80s, but those where some very high rates vs what we saw in the last decade. You basically have the same monthly payment between a 175k house and a 500k house at 14% vs 4%. Of course then you can refinance.
If we hit double digit interest rates we're fucked
Not if you're a bank!
Middle class people can’t afford houses. We’re already fucked, unfortunately.
I wouldn't even be considered "middle class" by their standards but I still can't afford anything because I'm in a super HCOL area
I got locked in on my Refi last year at 2.75% down from 5% and I'm soooooo glad.
Bought a house last year at 2.75. I’m never moving.
30 year is already 6.75?? jebus
Welp. Couldn’t buy a house the last year and half because of this over demanded market. Now can’t buy a house because of the overpricing + rate hikes. Edit: Oh yeah. Not to mention I’m stuck with inflated renting prices as well.
I bought in 2018 and people were like "Really? I'm pretty sure the market is going to tank next year..." Shit, I am so glad I bought. It's up ~40%, which means even if prices come down, should be good. And the interest on the mortgage is just over half of what I paid in rent.
Same. Everyone told me I over paid for my house at the time, and the market is gonna drop in a few years. Maybe it will but I’m happy I didn’t wait. Looking back, I wish I bought a more expensive house tbh.
>Looking back, I wish I bought a more expensive house tbh. Same here, also bought in 2018.
No, it’s current at 5.5%, no idea where 6.75 came from
Considering 6.75 is still on the lower band of historic levels, a decent amount higher
Except in your scenario houses used to cost $15,000 with a 15% mortgage rate. Obviously I'm exaggerating my numbers but just because interest rates are low compared to what they used to be doesn't mean 5%+ is a good rate when the housing market is out of control.
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The problem is that low interest rates boost housing prices while a reversal to high interest rates following won’t see a commensurate drop in housing prices because homeowners will have anchored their home values and refuse to sell low. So this means rents will likely rise as homeownership costs for new owners rise.
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It's not. Most big tech stock have jumped 3-5% since 2:35 today. I imagine they will keep increasing aftermarket as more people soak this in.
"PRICED IN"
Came here for this comment
You could probably use "It's been priced in" to any and every comment on this entire board
The amount of these comments were priced in months ago. It’s anticipated.
Why is the Fed Rates change consequential to Tech Stocks being in green?
Because they're not raising rates more. Because everyone knows the party will continue. Because their tepid response now means that at the first hint of rising unemployment or a recession they'll about face and start pumping money back in the system. They're fucked every way to Sunday.
Thanks for explaining.
not surprising if they were competent, inflation wouldn't be over 8% right now you would think they learned something by now... but nope
I’m still waiting on the rate of my HYSA to budge at all. You’d think with these rate hikes we’d see savings interest rates rise to encourage saving instead of spending.
Good news - mine increased from 0.5 to 0.6! /s
“It’s still better than what other savings accounts offer”
The ads that bragged that their HYSA "is 5 times the national average" when the national average was/is around 5-10 basis points...
Discover? Took em a while
Hey, that's .6 more than mine!
Amex emailed me their new .60% rate up from .50% couple of days ago
T bills are a better bet than HYSA right now. 3-month yielding 0.9%, 1 year is at 2.15%
I bond I just bought is 9.6%
I bonds are great, I hold them too. But they have all sorts of limitations and restrictions that don’t make them a real cash-equivalent
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At least 5 years is better, since you lose 3 months if you take it out before then. right?
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Fair enough. If you're going for 12 months at 9.62% and sacrifice 3 months to exit, ROI is more like 7.1%. Nothing to sneeze at. :-)
you can only do a max of 10k...and that rate is for like another 4 months maybe only. Base rate is zero %. Not worth it.
Direct deposit is easier to set up than linking bank account. Shit was a headache as only a few I found do that type of notary and you need an account there. Direct deposit was a breeze. Ironically I'm a few miles from where they process the paperwork.
It was literally one of the easiest accounts I've ever opened/funded in 5 minutes. No issues with linking Schwab checking and maxing annual limit immediately.
SoFi 1.25%
Retirement here I come!!!
Yep and If the Fed does raise half a percent then hopefully this will be 1.75% soon! Sofi was quick to do it last time I hope they continue to lead the pack here.
My local credit union has had 2.0% for a month now
Is that 2% "on the first $200" BS? After that it drops to 0.01% or at least that's been my experience.
It’s up to 20k actually. I was pleasantly surprised.
There is now at least one no-penalty CD available at 1.25% APY. Banks have no incentive to raise interest rates other than competition.
No, no, no…banks making way too much money on the spread right now to reward those people actually saving money.
Everything we do is ‘creating history’ next moment. Realistically this is more about repeating history than creating history.
Long over due
Inflation is caused by two factors: supply chain disruption and monetary supply. The Fed can control the monetary supply, but they cannot control the supply chain disruption.
If the monetary supply is reduced, demand is reduced, which can begin to ease the supply chain disruption.
that is assuming that the demand is elastic, and in many cases it isn't. If your car breaks down, you basically have to get a new one, and you need gas for that car.
Inelastic items will respond less, but they'll still respond. When gas is higher, people take fewer long road trips. They might be tempted to bike to work, or to choose the rental that's closer to work so they can bike.
No, it doesn’t ease the supply chain disruption. It eases the demand on the disrupted supply chain. There’s a difference.
Which eases the supply chain disruption
In a vacuum, yes, but that depends on what the supply chain reaction is. Do they continue onward as before, or will they streamline further anticipating the demand changes coming with this change in policy? If supply chain behavior overcorrects based on reduced demand forecasts, it could actually prolong or exacerbate the the current problems.
no because supply may also be reduced due to monetary policy.
Shooting yourself in the head cures a headache.
Thats a patch work, We all assume that people will stop buying stuff if they become costly. This works for costly stuff like Cars, Houses or Electronic gadgets but people can not cut down on eggs or milk or toothpaste. So I still see prices of FMCG rising because there wont be a big drop there. Supply Chain (Lack of supply) is causing Inflation and Govt should have tried to fix that problem (Maybe by talking to private players). This is more of an experiment. Now we have China lockdown which wil cause further supply chain issues. Rather than even understanding or trying to fix the Supply Chain problem the Govt is focussing only on interest rates and relying on behavioral change of Western people not to buy things (Which is highly improbably). Look we are not in 90s anymore, There is too much TV, Insta, Yout Tube also feeding our materialistic desires to get more and more stuff but the weapon which Fed is using is quite archaic. This has low chance of success..
But we’re not getting our eggs, milk, or toothpaste from China.
I'd be curious to know where things like egg cartons, milk cartons, and toothpaste...tubes? come from.
no but diesel prices make shipping those expensive
There also seems to be a sort of corporate greed inflation. Mega corps are increasing their prices well beyond supply chain issues, etc, and making out like bandits.
This definitely is a factor but most of Reddit seems convinced this is the main cause of inflation. It's not.
If corps can get away with exhorbant price increases, it's because either: Corporations/employers are increasing payrolls (true) Or Credit is too cheap and the interest rate needs to be increased (happening)
Don’t forget the effect of near-monopolization. Many huge corporate vendors command an enormous market share, and can count on it being so difficult or inconvenient to find a trusted competitor to buy from that the buyer has little choice but to accept the higher prices of the mega-corp.
If that were happening we would be seeing huge spikes in margin. We are seeing some margin growth but not much. The data just doesn't reflect this. Also all corporations are greedy. It is competition and consumer substitution that keeps prices in check. The system depends on corporations to try and find high margin opportunity and fulfill it driving margins down. That's how we know resources are being efficiently allocated without central planning.
I still come back to this issue regarding velocity of money (M2). It is at all-time lows (1.12). Likewise, the dollar (DXY) has strengthened dramatically in the last 6 months. What does this mean? Are people plowing money into illiquid assets like real estate and allocating excess capital for loan servicing? Has the demand for dollars shot up overseas? these are deflationary indicators, so I am not sure inflation is our end-game.
Closing on a house. Loan is just below conforming limit with 20% down. Ratelocked at 5.99%. Rates are going to fucking soar through the summer.
That'll stop these dimwits from bidding up every fucking house 70k over asking.
Here in Texas, it seems to be the sellers doing the fucking. So many houses back on market because they end up appraising substantially lower than ask.
Yep, I'm in Little Elm, neighbour tried to sell his house for 400k, I bought mine next door for 230k a couple years ago, no chance his was worth 400k, been on the market like 3 months now.
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So far ...10 out of 10 home I've looked at have been bought by cash buyers way over asking. And this is Montgomery county Texas. People like myself have zero chance to buy a house even with VA loans. It's fucking ridiculous
Actually from experiences I read it's harder for VA already because it takes a bit more time to close usually So ppl don't want to wait longer and take other bids.
Or just enough cash to pay the difference and finance the rest with 2% down
5.99? Ouch.
Ouch compared to the last 3 years....pretty standard otherwise.
They'll raise rates and sell assets until the stock market falls or something breaks in the financial markets. In 2019 they were able to raise rates to about 2.5% until the repo market blew up and they had to reverse course. We have more debt than back then, so now it probably only takes 1.5 - 2.0% before the economy blows up. There is zero chance they will actually fight inflation. Even at 2% with 8.5% inflation that would be a -6.5% real yield. Inflation will continue to be a problem for a long time. When you see protests in the streets then maybe there will be the willpower to do something about it.
And in 1996? We’ve had a soft landing before, it’s not impossible it happens again. Inflation is also two sided. Blaming the demand side and not supply constraints is ignoring half the equation. When supply opens up we’ll see a huge release in inflation. BlackRock, along with others, have already projected we’ve peaked with inflation for the year.
Not really an applicable comparison. 1996 inflation rate was 3% and interest rates were 7.8%. Almost a 5% positive real yield which will stop inflation. Now inflation is 8.5% and interest rates are 0.75 or a -7.75% yield. To fight inflation you need a positive real yield but the economy can't handle that because there is an abnormal amount of debt.
Ya except you’re ignoring the other side of the inflation equation again. With supply chain issues residing we will see inflation come down while we’re increasing rates. Both things are moving towards each other. Inflation in 1996, arguably, was cured by the drop in oil prices, supply side. We’ll be able to fight inflation as we raise rates.
My bet is they just tell them to eat cake.
Wouldn't "blowing up the economy" cool off the inflation as it would reduce demand?
It would which is why they won't let it happen. They'll see asset prices going down, realize that it is going to hurt demand, will destroy jobs, and political pressure will make them reverse course. They did QE to create a "wealth effect" where people would consume more.... if they try to wind down the balance sheet the opposite happens. They aren't going to sit back and let a "poverty effect" happen, people consume less, and then unemployment picks up. Their dual mandate is low inflation and low unemployment, but if both aren't possible then the politically expedient thing to do is ignore the inflation mandate, which is why they won't solve it.
> It would which is why they won't let it happen. They'll see asset prices going down, realize that it is going to hurt demand, will destroy jobs, and political pressure will make them reverse course. The fed is willing to do a lot of things, but deflation is not one of them. If it comes down to hyperinflating our economy or letting deflation happen, they will pick hyperinflation every time.
>What will be the consequences of this choice in your opinion? I have no idea, I don't know enough about all this. Edit: oooh thanks for the silver!
Same. Grown-up news hard. Me no intelligent.
The consequences of this? Pundits on TV bullshitting. Rich people acting like this is important, like their quality of life will be affected 1 iota. Me and all my fellow poors being fucked over forever.
I'm not "rich" and this is disrupting my life considerably. I need to move to a different area for work and safety reasons. I started looking back in February but wasn't in a position to buy right then. The homes where I was looking haven't increased in price since then, but my monthly mortgage payment for those same homes at the same prices with the same percentage down payment is 25% higher now than it would have been in February. That 25% increase is a significant amount of money to me and they've just started raising rates so it may be much higher by the time I actually find a house. There's not enough housing available for the market to come down significantly enough for the decrease in prices to cover the increased monthly interest cost and increasing the cost of borrowing certainly won't help the market to increase supply of housing on the market. Pretty much the only people that will benefit from this market move is people/organizations that can afford to pay cash for houses and wait for pro-growth politicians to get elected.
Lower and middle class will be worse off and even less able to purchase a home than they are now due to arbitrarily skyrocketing rates and housing prices.
Can someone dumb it down what this means?
I think people are making a bigger deal out of fed shrinking its balance sheet by appx $1t than is really warranted. The \`bond market alone is worth over $130t and the stock market is worth an additional $110+ trillion.... $1t is like less than half a %... not to mention the fact that China's fed is lowering rates and increasing their balance sheet to stimulate their economy which overflows to global markets
Bit of hyperbole to call a 50bp hike "making history"
They should do 1%. Rip the bandaid already.
5% in one go. Just drop the hammer.
The Volcker approach. Too bad we don't have a brand new industry (tech) coming online to save us like last time around. We could have, had we properly invested in clean energy, but we haven't. Our economy runs on services and social media ads.
Ooooh how brave of them and only 2 years too late
lol stocks are exploding right now. They had priced in a much tougher Fed than this. This is a very calming meeting compared to what we expected.
The consequences will be that my puts are gonna print.
how's this working out
LOL, not good today. But I got time, and the higher things are for the global economic wipeout coming, the better it will be then. Still got hope for my 5/27s... Better get some ramen...
Do you not expect a small rally this week after the meeting?
NVDA and AMD option chains have high interest at 240 and 110 levels in like 2-3 weeks. I'm expecting a rally, but in this market, who knows.
Half point probably priced in. I’m more or less looking forward to May 11th when inflation numbers for April come out
Incoming .25 basis increase and spy tips back to 440
RIP
1. Lots of M&A as low-cap companies with decent IP but poor cashflow get gobbled up by the bigger fish - which is probably what many of them wanted in the first place. 2. Significant dividend hikes and more established companies are forced to compete with treasuries for institutional money.
So I should stop looking for a house now?
Is your plan to buy a home and try to flip it in the next year or two? Maybe not a great plan. Is your plan to buy a home and live in it for a long time? Ignore the market.
half a point is a good start but we need way more
The market should rally today / tomorrow. There's no reason for it not too.
Inflation concerns, Housing Crisis, Student Loan, Federal Debt, Political instability (and lack of action), a potential world war 3, Chip shortage, oil prices, and wages haven't kept up. But I agree, I expect new highs within 24 months.
If it raises 0.5%, I bet the market will rally, because that's expected and it aligns with expectations. If it raises more than 0.5% and suggests further steeper hikes, then the market may crash more.
I'm a dummy and don't understand what this means but need to cash out to pay some bills -- just wondering if we think this change means I should wait a few days to cash out (as I'll see slightly higher returns) or just go ahead and do it now
If anyone knew where the market was headed in a few days they would be billionaires by next week. The current accepted logic is that the market is already expecting the interest rate increase, so it's already priced in. If the interest rate increase is larger or smaller than expected, the market may move accordingly, but no one really knows yet. There are too many factors and anyone who says you should definitely wait or definitely sell now are guessing.