re: Why the hell is the Fed thinking about lowering interest rates?

quote:

---

How? For my family of 3 at $350K/yr (all W2) in Texas, taxes sure in the hell increased. Capping SALT was a major difference since the home taxes in Texas are ridiculous, even though there is no state income tax.

---

Just further shows that those tax cuts were NOT focused on the high earners.

quote:

---

don’t blame the mean old government for your problems

---

While true, back them the govt wasn't handing out free money to buy votes, or at least it was a significantly smaller scale.

This is just another false flag leading to November. Oh look Joe dropped out and now that Kamala is running, the gas prices are down, the interest rates are coming down, etc. There will be more as we get closer to November, but it’s all smoke and mirrors to dupe the general public.

quote:

---

Why the hell is the Fed thinking about lowering interest rates?

---

Short version: The data supports it.

Going a bit longer and deeper ( ):

Because JPow is trying to thread the eye of the needle and pull off a mythical "soft landing". Their hope is to bring down inflation with as little Unemployment as possible.

The federal government injected well over a trillion dollars of liquidity directly into the economy within a couple of months while simultaneously demanding people not work. This was always going to inflation, there was never any other way. Ever.

A major signal they have been looking for to begin considering phasing in cuts was for Unemployment to hit 4.2%. We just hit 4.3%. Along with that, they would need a significant belief Inflation was trending downward (otherwise we may have a stagflation scenario).

The reason for the 4.2% target is that with the continued low unemployment, they believe a move to that level of UE would mean enough excess liquidity had been drained from the economy that they could cut rates a quarter point without risking a return of inflation (again, assuming inflation was actually moving downward and not remaining sticky at/above 3%).

The problem is that they've misread this entire event from the start (remember how the inflation was only "transitory"?). I give them kudos for finally standing up to Wall Street and raising rates regardless of the market's demands and shitfit-throwing (for all but two -I think- rate increases, the market took a big dive because it was demanding no more increases), but what they've been doing is akin to using a wrench and a screwdriver to pound a nail into a piece of wood instead of a hammer. Their timidity has drawn (and will continue to draw) this affair our far longer than it needed to be. Had they raised rates faster, or at least gave another .25 at the end of 2023, we would likely already be cutting rates (or, at least, better positioned for them).

Instead we're still getting conflicting data where production costs are rising even while orders have dropped. GDP has been strong while Unemployment has been slowly increasing and inflation has been stubbornly clinging into the 3% region (although that may change this month, we'll see on the 14th - inflation data here is going to be pretty critical for deciding on a September cut).

The July and most of the August numbers should be in by the FOMC meeting in September. Those will give a clearer picture of what should be happening with rates. At this point, we're almost certain to get a .25 cut in September (anything more is just wishcasting).

August/September are Back-to-School months, so sales are usually strong. Many are trying to wish 3 cuts for 2024 into existence, but at this point in time a big part of that possibility is going to depend on what happens with those late-summer numbers. Remember, you don't cut rates when the economy is strong or you risk invigorating inflation.

quote:

---

You lost me there. Trump tax cuts made a noticeable impact for our family, and we're as low middle class as they come

---

Your Trump tax cuts are expiring. Guess which ones are permanent?

quote:

---

Family of four with joint income of $125k in Indiana.

---

Boy, that ain’t low middle class. Weird flex.

Median household income in Indianapolis is $60,000