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Fed hikes rates as inflation worries push up bond yields

reuters.com

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

#151

Post by burnt-resistor »

throwawaysleep wrote: post #68
im_down_w_otp wrote: post #55

It bugs me that the Fed has no mechanism to really deal with supply-shock driven inflation. Prices are shooting up, but not strongly correlated to money supply at the moment. They’re shooting up because there are a dozen or more entirely capricious and totally self-inflicted supply-shocks due to bizzaro tariff “policy”, disastrous military adventurism, and general erosion of the USD the prime vessel for international…

Isn't the goal then demand destruction?

The net effect is demand destruction. The US shouldn't be exporting diesel when it lacks sufficient refining capacity to make up for all of the capacity destroyed or unavailable from the US war of choice with Iran. And as the price of US domestic diesel goes to $6+, oil demand is going down both because there's insufficient refining capacity and there's a general slow down in the economy from the added inflation baked-in by higher oil prices and higher diesel prices.

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

#152

Post by aftbit »

carefree-bob wrote: post #147
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…

A 0.25% rate hike is going to cause a recession? How, exactly, would that happen? Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there. My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement a…

I dunno about the politics, but personally I don't think there is a generic "correct" value. The rate describes the state of the world, and the "correct" value is whatever accurately describes the state of the world.

There is a separate question though - is that state of the world good or bad for people? Is it better or worse today than it was yesterday? What can we do - collectively - to push it in a direction that best serves our collective interests? These are valid questions to ask, and I think each takes us further in the direction of politics.

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

#153

Post by quickthrowman »

carefree-bob wrote: post #147
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…

A 0.25% rate hike is going to cause a recession? How, exactly, would that happen? Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there. My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement a…

> A 0.25% rate hike is going to cause a recession? How, exactly, would that happen?

I didn’t see anyone claim a single 25 bps hike will cause a recession.

The 30 day FFR futures (/ZQ) curve is pricing in an 80% chance of two more hikes by the March 2027 meeting and a 70% chance of 3 or 4 hikes by Sept 2027’s meeting. So, 50 bps predicted in the next 6 months and 25-50 bps more within one year.

Source is the CME Fedwatch tool: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...

I think we’ll need to go to 5%+ within the next two years if fuel costs remain elevated.

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

#155

Post by marcosdumay »

karp773 wrote: post #144
marcosdumay wrote: post #61

Earlier quoted context omitted.

It's interesting that this article doesn't have the rate... (It moved from 3.5% - 3.75% to 3.75% - 4%, the US uses a range, not a fixed number.) But this one is something that gets results almost immediately. We will see what it does in 2 or 3 months, not years.

What results? Overnight interbank loan rates, yes, immediately. The effect of those rates on the economy? It will take time to propagate. Heck, some important committees only meet like twice a year.

> What results?

Inflation numbers, companies firing, and the magnitude of fictional numbers on financial markets.

Lots and lots of things are slower to react, but those 3 are quite big and hard to ignore.

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

#156

Post by ProfessorLayton »

carefree-bob wrote: post #147
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…

A 0.25% rate hike is going to cause a recession? How, exactly, would that happen? Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there. My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement a…

>My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be.

Maybe find a better canned response? US debt has never been higher, and because of this even rates that are below historic highs can cause economic chaos.

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

#157

Post by aftbit »

AnimalMuppet wrote: post #120
TheJoeMan wrote: post #74

Earlier quoted context omitted.

Unfortunately, during that time is when they screwed around with the gold confiscations. So the best option would have been to illegally hoard gold until they struck the statute down?

Oof. Private gold ownership was illegal until 1975. So, you have to hide it for 40+ years? That investment strategy has some significant downsides...

I'm shocked that more people don't know about this. It seems insane that the "land of the free" (yeah I know, not really, but that's the pitch anyway) would have such an obviously command-economy policy through the heart of the cold war.

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

#158

Post by aftbit »

hsbalanxvxjsmab wrote: post #119
ThunderSizzle wrote: post #58

Earlier quoted context omitted.

The country has been _run_ by fools for 26 years. Congress has had 26 years to do something about the fiscal situation, and we've had four presidents, and the fiscal responsible side of the electorate is never listened to. Both sides are to blame - neither will fix the problem. Obama could've made that his goal - he was competent, had a lot of political good will, and many people were frustrated at the bailout policy…

I would love to hear what was "radical" or "divisive" about Obama's policy. A significant portion of the country disliking him because of his skin color doesn't make his policies "radical"

A universal health care mandate were both radical and divisive, and the popular nickname for the ACA today is "Obamacare".

I happen to think the policy was a good idea, and voting to keep it in play was the best vote of John McCain's career ... but it was definitely both radical and divisive.

Now, much of the "mandate" has been stripped away, health care remains a mess, and access is far from affordable, but you can't really blame that one on Obama.

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

#159

Post by carefree-bob »

ProfessorLayton wrote: post #156
carefree-bob wrote: post #147

Earlier quoted context omitted.

A 0.25% rate hike is going to cause a recession? How, exactly, would that happen? Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there. My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement a…

>My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Maybe find a better canned response? US debt has never been higher, and because of this even rates that are below historic highs can cause economic chaos.

Did you ever think that the reason why US debt is so high is because rates are so low and borrowing is so cheap? Higher rates are needed, and are really the only mechanism to reduce borrowing.

We are seeing asset bubbles across the board in this economy, in housing, in equities, auto loans, etc. It turns out that if you make something cheap, people buy more of it, and that includes the government.

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

#160

Post by carefree-bob »

quickthrowman wrote: post #153
carefree-bob wrote: post #147

Earlier quoted context omitted.

A 0.25% rate hike is going to cause a recession? How, exactly, would that happen? Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there. My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement a…

> A 0.25% rate hike is going to cause a recession? How, exactly, would that happen? I didn’t see anyone claim a single 25 bps hike will cause a recession. The 30 day FFR futures (/ZQ) curve is pricing in an 80% chance of two more hikes by the March 2027 meeting and a 70% chance of 3 or 4 hikes by Sept 2027’s meeting. So, 50 bps predicted in the next 6 months and 25-50 bps more within one year. Source is the CME Fedwa…

Yes, I think 5% will eventually happen, but I don't think we'll get there before the mid-terms, the Fed moves slowly.

Basically you have an inflation shock and you want the reaction function to be higher, so if inflation is 1% too high, you want a 1.5% or 2% rate hike. If inflation is 1% too low, you want a 1.5% or 2% rate cut. The reaction function has to be greater than the deviation from target, but this gives you price stability, it doesn't require a recession, although it may cause a recession.

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