Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Fed hikes rates as inflation worries push up bond yields

reuters.com

Post reply on HN
Print view View original

121–130 of 242 posts

Re: Fed hikes rates as inflation worries push up bond yields

#121

Post by DoesntMatter22 »

matteoraso wrote: post #97
jameslk wrote: post #57

Earlier quoted context omitted.

Both parties are responsible for the inflation and debt. Fiscal policy is largely driven by congress, not the president

And which party controls congress? I'll give you a hint: It's the party that spent decades advocating for irresponsible tax cuts without cutting spending[0]. [0] Yes, I know that the Republicans said that they were going to cut spending to match the tax cuts, but that never ends up happening.

Partly it doesn't happen because you can't really get much done even if you have a majority. You really end up needing a super majority.

The one thing both parties agree on though is running up a massive deficit

Re: Fed hikes rates as inflation worries push up bond yields

#122

Post by iamnothere »

darth_avocado wrote: post #34
iamnothere wrote: post #9

Earlier quoted context omitted.

Higher rates means financing/borrowing is more expensive. Mortgage rates will go up, possibly pushing home prices down. This is neutral for buyers because of higher rates, but bad for sellers. Loans (personal or business) will be harder to come by. Layoffs, or at least hiring freezes, are more likely. Companies will move into a defensive rather than an growth mode. Higher unemployment will lead to more desperation, a…

Mortgage rates are not decided by the fed rate as much as they are by the bond yields. There’s a reason why the mortgage rates were above 7% yesterday even when the fed rate has been stable for a while. This rate hike is aimed to stabilize the bond yields which in turn will lower the mortgage rates.

It seems like this would depend on the bond market’s perception of whether or not this hike is the start of a trend. It could be seen as a signal that political attempts to lower rates have been unsuccessful.

Re: Fed hikes rates as inflation worries push up bond yields

#124

Post by jrflo »

MarkusQ wrote: post #98
jrflo wrote: post #30

Earlier quoted context omitted.

To be honest though cash hasn't been cheap for a while, not really since 2021. We have been in relatively high interest rates for the entire AI boom. Going from 350-375 to 375-400 won't be a huge shock for hyperscalers. Interest rate are still lower than when many made their initial investments in 2023-2025

Depends on your time frame for "relative to"; rates have been high compared to ZIRP-era, but still moderate to low when compared to historical norms.

I'm referring to ZIRP, since the OP was referencing cheap cash during ZIRP

Re: Fed hikes rates as inflation worries push up bond yields

#125

Post by darth_avocado »

hirako2000 wrote: post #92
darth_avocado wrote: post #34

Earlier quoted context omitted.

Mortgage rates are not decided by the fed rate as much as they are by the bond yields. There’s a reason why the mortgage rates were above 7% yesterday even when the fed rate has been stable for a while. This rate hike is aimed to stabilize the bond yields which in turn will lower the mortgage rates.

But bond yields are based on a market. If interest rates go up, bonds get sold (for better yield bearing products), pushing the yields of those bonds higher. And it finds some equilibrium. The fact it isn't immediate has to do with short term vs long term bonds. When they mature and the pace of arbitrage. I don't see how a rate hike is meant to lower mortgage rate. And just looking at the figures shows it's the oppos…

You have to look at the current context. Bond yields have been spiking, mostly because of the inflation expectations from oil prices and tariffs (mostly oil prices). Mortgages mostly track 10 year yields, which is why when fed dropped the rates back to back, the mortgage rates didn’t come down. The current hike (and the next one) is supposed to create a deflationary pressure, but also provide confidence to the market that the fed will step in to cool inflation if necessary. This in turn lowers the yield on 10 year treasuries and therefore mortgage rates.

The fed rate provides a floor for mortgage rates, but the 10 year yield and mortgage demand decide the ceiling. Currently the demand is pretty low, and therefore the yield mostly controls the mortgage rates.

Re: Fed hikes rates as inflation worries push up bond yields

#126

Post by atmavatar »

jameslk wrote: post #104
matteoraso wrote: post #97

Earlier quoted context omitted.

And which party controls congress? I'll give you a hint: It's the party that spent decades advocating for irresponsible tax cuts without cutting spending[0]. [0] Yes, I know that the Republicans said that they were going to cut spending to match the tax cuts, but that never ends up happening.

The high inflation since Covid and $40 trillion in debt didn’t happen under one party

The (vast?) majority of the debt happened as the result of the Republican party both increasing spending and cutting taxes every time it lands someone in the White House and before midterms flip the House back to Democrats.

There's a fair argument to be made that the Democrats could/should have reversed these disastrous fiscal policies when they gained power, but it's important to be wary of Murc's Law while also acknowledging doing so would also burn a lot of political capital Democrats never seem to have much of.

The American electorate is a grade school child constantly evaluating which parent it likes the most. One tells you that you can eat as much candy as you like and play video games all night (neither of which hit you until the following day), while the other occasionally tells you to eat your vegetables, do your homework, and clean your room.

Re: Fed hikes rates as inflation worries push up bond yields

#127

Post by iamnothere »

Edman274 wrote: post #32
leptons wrote: post #3

Earlier quoted context omitted.

This comment isn't helpful. Please explain for those of us without a degree in economics.

Stagflation is when the economy stagnates yet inflation is higher than ideal. Inflation and economic activity are typically correlated, and the conventional wisdom back in the day was that you couldn't have unemployment going up and things costing more, because it was expected that demand going down puts a downward pressure on prices. When people aren't hiring and buying but things cost more and more, life just kind…

I suggest A Boy And His Dog (based on a Harlan Ellison story)

Re: Fed hikes rates as inflation worries push up bond yields

#128

Post by impure »

dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

Wouldn’t surprise me if it was a lot sooner given skyrocketing fuel costs, high bond yields, and unsustainable AI spending.

Re: Fed hikes rates as inflation worries push up bond yields

#129

Post by carefree-bob »

evanwolf wrote: post #63
verelo wrote: post #11

Edit: Whoever the hell flagged this lol....people were complaining the parent comment wasn't helpful so I took time to write a thoughtful response with citations. You can't win around here. --- The counterintuitive part is that a lower Fed rate doesn't necessarily mean cheaper borrowing for the government. The Fed sets an overnight rate; someone lending for ten years cares about inflation and interest rates over thos…

I thought bumping up the prime rate slowed consumer spending. But the recent price hikes are because supply is hosed (oil, tariffs), not that demand has been bidding up prices. So how is this supposed to help?

It doesn't matter whether it is a supply shock or a demand shock, the correct response to inflation is to raise rates, which reduces economic activity and in this situation the reduced activity reduces demand for oil, which is what is needed in an environment in which we have less oil than normal.

Although it is the third world that is going to take the hit, the wealthy nations will bid up the price of oil to ensure they continue to get it, the poorer nations will be priced out. What is an annoyance in the west -- say needing to delay a major purchase or postpone a vacation or reduce expenses - translates to famine and deindustrialization in the global south.

Maybe it's not such a good idea to be waging war against major resource exporting nations, the US and Europe are now sanctioning about half of the global resource exporting nations, and the only benefit of this is higher prices in our domestic economies and China coming in to sign trade deals for discounted Russian and Iranian oil.

KSA also needs to lay off the Houthis and lift the embargo, it's long past time that they give up trying to control who runs Yemen.

Re: Fed hikes rates as inflation worries push up bond yields

#130

Post by darth_avocado »

bwb wrote: post #86
darth_avocado wrote: post #52

Earlier quoted context omitted.

Re: mortgage rates https://www.washingtonpost.com/business/2026/09/16/heres-wha...

Remind me in 6 months :) I'll be you; they are higher this time.

That wouldn’t be a great way to measure it. I’m only talking about the fed rates, how it impacts the bond market and therefore the mortgage rates. If someone decides to nuke the oil infrastructure of the world tomorrow, this rate hike doesn’t matter and your hopes and dreams of a low mortgage rate get nuked along with the oil infrastructure.
Post reply on HN