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Federal Reserve to increase interest rates by 75 basis points for the third time

federalreserve.gov

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Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#121

Post by paulpauper »

ferdowsi wrote: post #16
maxfurman wrote: post #14

I'll echo what some folks have said in other threads, we've had rates down near zero for fifteen years, and we've got to get them back somewhere near historic normals at some point. If only so they can be cut again during the next crisis. How much is our entire culture the result of cheap money?

A substantial chunk of the tech industry are speculative zombie companies that are built on the edifice of zero interest.

What were interest rates in the late 90s? hmm...even higher than today, yet that was the biggest tech bubble ever. If VCs and other investors expect to make >100% in a year , what does it matter if the interest rate is 3% or 1%?

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#122

Post by bryanlarsen »

Victerius wrote: post #94
Analemma_ wrote: post #79

Earlier quoted context omitted.

What does "historic normals" mean? Obviously rates need to be going up right now, but if you look at the very long (i.e. centuries) trend of natural interest rates, there's a clear monotonic downward trend. Who's to say the natural rate of interest isn't zero?

8-15%. I'm looking forward to it. It'll force more people to be more financially responsible. No one should finance furniture, ATVs, or electronics. If you can't pay cash for these things, save, or don't buy. Edit: @Analemma That's just the extreme end of the scale. 30yr fixed mortgage rates were above 10% during all the 1980s[♤]. I'd like to see a return to that. [♤] https://fred.stlouisfed.org/series/MORTGAGE30US

The historical interest rate for savers is negative. Before the invention of fractional rate banking, if you had money you had to pay guards to protect it for you.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#123

Post by bluGill »

unethical_ban wrote: post #76
freeone3000 wrote: post #63

Earlier quoted context omitted.

If this isn't true for your area, the general advice is to wait a few years. Your mortgage payments are locked in, rent increases year-over-year at single- or double-digit percents.

Mortgages can be refinanced at a lower rate when the market allows, correct?

IF/WHEN the market allows.

There is no particular reason to believe rates will go down again. They might, they might not. Historically todays rates are around the normal low.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#124

Post by greatpostman »

bryanlarsen wrote: post #118
greatpostman wrote: post #95

Earlier quoted context omitted.

This is an insane assertion. The fed has made consistent huge mistakes in monetary policy. No serious investor or public financial figure thinks these cheap rates were necessary

We live in a world that is awash in capital because old people & rich people have a large amount of capital. When the supply of something is high, the price goes down. And the price of capital is interest rates.

The excess liquidity comes from low rates. No serious financial investor thinks otherwise

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#125

Post by encryptluks2 »

a-user-you-like wrote: post #96
hot_gril wrote: post #65

Earlier quoted context omitted.

The Fed creates money, which nothing else can do. Of course the money supply has its own ebb and flow from private banks and such offering loans, but it's hard to ignore M2 doubling every 10 years.

Yep, we print 40% of all known money in the last 2 years, needlessly lock everyone down, and then complain that the rent is too damn high

Poor landlords must be suffering owning houses and all while everyone else is enjoying facing homelessness

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#126

Post by JumpCrisscross »

slaw wrote: post #120
JumpCrisscross wrote: post #101

Earlier quoted context omitted.

> $90B/month it will take 89 months to unload The optimal Fed balance sheet is estimated to be around $4tn [1]. A Fed with a ballooning balance sheet distorts financial markets. A Fed with no assets must do weird stuff to fight inflation, which distorts financial markets. (In a non-reserve case, a central bank with no reserves goes bust.) [1] https://advisors.vanguard.com/insights/article/thefedsplanto...

Fed doesn't have to fight with inflation if it not creating one. So Fed's balance sheet could be as well $0

> Fed doesn't have to fight with inflation if it not creating one. So Fed's balance sheet could be as well $0

Inflation has multiple causes. Fixed-money economies experienced inflation and deflation throughout antiquity.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#127

Post by friedman23 »

randomdata wrote: post #70
friedman23 wrote: post #50

Earlier quoted context omitted.

As someone that has been exploring real estate for the first time, after speaking with some people it seems that mortgages have generally been less expensive than rent? Good luck finding something like that with today's prices and interest rates.

Rent has skyrocketed recently, largely because people are afraid to buy houses right now, thus more demand for rental units. A mortgage may still be cheaper if you can stomach the reality that you might quickly end up underwater. That said, if you have rent control locked in, the choice is likely easy.

My comment is saying rents are cheaper not mortgages.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#128

Post by nine_zeros »

fny wrote: post #82
maxfurman wrote: post #14

I'll echo what some folks have said in other threads, we've had rates down near zero for fifteen years, and we've got to get them back somewhere near historic normals at some point. If only so they can be cut again during the next crisis. How much is our entire culture the result of cheap money?

I'll mention something that most people are forgetting. The Fed was forced to cut rates to zero for a long time because fiscal policy was not stimulative enough. Rates are a shitty stimulative tool. Here's Bernanke in 2012: https://www.theatlantic.com/business/archive/2012/12/ben-ber... Low rates help people with money borrow more cheaply, accrue more wealth, and kick bankruptcy cans down the road indefinitely. It al…

> The Fed was forced to cut rates to zero for a long time because fiscal policy was not stimulative enough.

It's not just fiscal stimulus but "how" the stimulus was applied.

It's not like the government isn't spending enough. It is spending. Until recently, all the spending went on tax credits and military.

What we need is fiscal stimulus in industries of the future. Only the current administration gets it and made it happen with the recent bill to support new energy transition.

We need more fiscal stimulus in cheap production of pills, medical practitioners, hospitals, daycare services and housing. Literally just give incentives to produce more units of these.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#129

Post by dragontamer »

boringg wrote: post #11
markus_zhang wrote: post #3

I'm wondering if they are going to bite the bullet and raise like Volcker. But again I realized that I actually do not understand the source of inflation and how much contribution each source has. We all know that the war, Covid and monetary policy are three sources but are there other structural sources? What about the trade quarrel between US and China? How much does it hurt for each industry? I should read some pa…

After the election...

Powell is Trump's pick (1st term) AND Biden's pick (2nd term) with like 89 votes from the Senate.

For better or worse, the man and his circumstances has proven himself to be apolitical.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#130

Post by jpgvm »

markus_zhang wrote: post #3

I'm wondering if they are going to bite the bullet and raise like Volcker. But again I realized that I actually do not understand the source of inflation and how much contribution each source has. We all know that the war, Covid and monetary policy are three sources but are there other structural sources? What about the trade quarrel between US and China? How much does it hurt for each industry? I should read some pa…

The main source is definitely monetary policy, this was supremely obvious from the enormous asset bubble that ballooned out of the pandemic with risk-on assets like tech stocks and crypto exploding in valuation. The reason this happened is when interest rates are held at near zero then future profits are valued significantly higher (normally they are discounted by the interest rate, or more correctly the "risk free return" of US 10Y government bonds).

It also manifested in higher savings balances etc.

The main reason this happened was the Fed didn't trust the administration to deploy appropriate fiscal stimulus as in the past trying to rely on US politicians has been a poor choice. Unfortunately we ended up with both monetary policy and fiscal policy deployed at full ball. If we had seen a weaker or more targeted monetary policy that aimed to just unfreeze credit markets and have fiscal policies step up to handle depressed employment/industry shutdowns the fallout would have been significantly decreased.

For instance China did cut rates and reduce the reserve requirement ratio (US also did this, it was essentially zero until start of 2022) they didn't get anywhere near that "essentially zero" rate that the US did. This means their domestic inflation remained manageable, most of their inflation is attributable to imported sources like energy and commodities. They instead pursued more targeted policies aimed at addressing specific industries and socioeconomic groups affected.

So yeah, it still is a combination of things but monetary policy in the US had an outsized impact on inflation globally compared to circumstantial factors IMO.

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