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Fed Official Says 0.75-Point Interest Rate Rise Seems Most Likely in July: WSJ
Posted on 7/14/22 at 4:55 pm
Posted on 7/14/22 at 4:55 pm
quote:
Fed Official Says 0.75-Point Interest Rate Rise Seems Most Likely in July
Wall Street Journal
Federal Reserve officials are wrestling with how to set expectations for their policy meeting in two weeks after another scorching inflation report threatened to again upend their unusually precise guidance.
Fed governor Christopher Waller on Thursday pushed back against market expectations that the central bank would lift its benchmark federal-funds rate by a full percentage point at its July 26-27 gathering, even though he left the door open to such a move if economic data revealed stronger-than-expected demand.
Mr. Waller said Wednesday’s inflation report, in which the Labor Department reported the consumer-price index rose 9.1% in June from a year before, was “a major league disappointment.” The CPI index rose at the fastest pace in more than 40 years and revealed a broadening in price pressures even after accounting for large gains in food and energy prices last month.
4
Posted on 7/14/22 at 5:02 pm to member12
We'll officially be in a recession once Q2 GDP numbers come out. The Fed might not be as aggressive this month.
Posted on 7/14/22 at 5:07 pm to dewster
quote:
We'll officially be in a recession once Q2 GDP numbers come out. The Fed might not be as aggressive this month.
Paul Volcker would be like "the interest rate hikes will stop when I say they stop!"
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Posted on 7/14/22 at 5:09 pm to UndercoverBryologist
Smoking a stogie during a congressional hearing like a G
Posted on 7/14/22 at 5:12 pm to PrecedentedTimes
He was 6’-7”
He probably didn’t take much crap from anyone.
He probably didn’t take much crap from anyone.
Posted on 7/14/22 at 5:15 pm to sawtooth
quote:
He was 6’-7”
He probably didn’t take much crap from anyone.
He became much more dovish on inflation after 2008 (although to be fair, we were technically in a deflationary crisis in 2008), but he was adamant about smothering out inflation in the early 1980s and stuck to his guns.
Posted on 7/14/22 at 6:18 pm to member12
Greenspan would have us back at 4% target rate already
Posted on 7/14/22 at 6:22 pm to member12
This might be a dumb question but how does raising interest rates fight inflation? It increases the amount it costs to borrow money and increases the amount people pay for interest on credit cards. This adds additional burdens to people already paying higher amounts for food, gas, rent, etc.
Posted on 7/14/22 at 6:51 pm to Demshoes
quote:
This might be a dumb question but how does raising interest rates fight inflation? It increases the amount it costs to borrow money and increases the amount people pay for interest on credit cards. This adds additional burdens to people already paying higher amounts for food, gas, rent, etc.
Creates downward pressure on demand. Over time supply increases relative to demand, driving prices down (or at least slowing rate of increase). Problem is that some of the increase we’ve seen will “stick” and not fall back to prior levels.
This post was edited on 7/14/22 at 6:54 pm
Posted on 7/14/22 at 6:53 pm to Demshoes
quote:
This might be a dumb question but how does raising interest rates fight inflation? It increases the amount it costs to borrow money and increases the amount people pay for interest on credit cards. This adds additional burdens to people already paying higher amounts for food, gas, rent, etc.
The "burden" is part of the point. It raises the cost of borrowing money, and likewise, it also encourages people to put money into savings to gain from the increase interest, so people are encouraged to spend less. Businesses spend less, which usually means lower employment, and usually tips the economy into recession. But this is considered a necessary tradeoff as lower spending forces prices on consumer goods to come down to match consumer sentiment. At some point, prices should come down to a more reasonable level and the economy achieves an equilibrium that allows growth to resume. It's harsh medicine, but getting out of an inflationary crisis is not easy.
quote:
Creates downward pressure on demand. Over time supply increases relative to demand, driving prices down (or at least slowing rate of increase).
What Free888 said.
This post was edited on 7/14/22 at 6:56 pm
Posted on 7/14/22 at 6:55 pm to member12
savings accounts finna eat
Posted on 7/14/22 at 6:56 pm to Demshoes
Raising the rates is designed to intentionally slow down spending in the economy.
Unfortunately, most people don’t have the will power to stop spending.
Dark times ahead if rates AND demand continues to rise with supply not catching up.
Unfortunately, most people don’t have the will power to stop spending.
Dark times ahead if rates AND demand continues to rise with supply not catching up.
Posted on 7/14/22 at 6:59 pm to Demshoes
quote:
This might be a dumb question but how does raising interest rates fight inflation? It increases the amount it costs to borrow money and increases the amount people pay for interest on credit cards. This adds additional burdens to people already paying higher amounts for food, gas, rent, etc.
It’s not a dumb question. it’s just an uneducated question.
The fed doesn’t actually set interest rates for banks. It sets a target Fed Funds rate. It accomplish interest rate changes by buying or selling securities from/to banks.
When they buy securities from banks, they give the banks money for the securities and increase the money supply. This greater supply lowers the interest rates and stimulates economic growth. They do this during bad economic times.
When they sell securities to banks, it decreases the money supply and makes borrowing more expensive. They do this during times of high inflation to curtail it.
Basically, the Fed has a two-fold goal of stimulating economic growth and curtailing inflation. These goals are sometimes opposed to each other, and so it’s always a balancing act to try and get just the right result.
This post was edited on 7/14/22 at 7:04 pm
Posted on 7/14/22 at 7:02 pm to MelGibsonPatriotGif
quote:
Raising the rates is designed to intentionally slow down spending in the economy.
Unfortunately, most people don’t have the will power to stop spending.
Dark times ahead if rates AND demand continues to rise with supply not catching up.
The drop in the stock market may be a blessing in disguise in the short term. People that were counting on their ever increasing 401k’s to fund their lifestyles may actually have second thoughts. My concern is that folks may start tapping the equity from their inflated home prices, and then home prices drop.
Posted on 7/14/22 at 7:21 pm to Free888
A lot of the previous posts are very correct. A few things though, the Fed is still buying Treasuries and MBS (mortgages), huge question is why still supply stimulus in both markets. Reason is they over burdened the giant investment banks with regulations that they can't take the supply.
The Fed has become political as far as stock market goes.
The dollar/oil inverse relationship has decoupled..not sure why except all countries fricked up and many worse than us.
Lastly, and most importantly we gave the majority of our country "free" money for 18 months, stimulus, giant unemployment. Etc..depending on State.
All that money fricked everything up and the reckoning is here
The Fed has become political as far as stock market goes.
The dollar/oil inverse relationship has decoupled..not sure why except all countries fricked up and many worse than us.
Lastly, and most importantly we gave the majority of our country "free" money for 18 months, stimulus, giant unemployment. Etc..depending on State.
All that money fricked everything up and the reckoning is here
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