I dont get it. Prices are rising because fossil fuels are more expensive. How do interest rate hikes fix that?
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Fed increases target rate to 3.75-4.00%
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Re: Fed increases target rate to 3.75-4.00%
#12Not a huge increase. Inflation is under control in the sense it's not rising, but they need to still pull a ton of money out of the economy; or let it ride. Powell's speech doesn't matter at all until we see the results of midterms.
The way I see it, it is still rising. But that was hidden by the fact that oil & gas prices dropped during the last period which was largely due to dipping into strategic reserves pretty heavily. Unfortunately I don't think oil & gas will continue to drop, or even stay even going forward. Especially with the middle east cutting production.
Oil dropped in the US because the current administration is depleting the strategic reserve. It's almost gone but the current administration doesn't care. The current administration punched down Trump attempting to top off the reserve for $24/barrel. Once the reserve runs out we'll be at 5.50 a gallon again but midterms will be over and I'm sure the other party will get the blame.
Re: Fed increases target rate to 3.75-4.00%
#13"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)
The idea is that people will cut spending somewhat to have more money stored in saving accounts where they produce more low-risk return. Cutting spending will dampen prices.
Increasing interest rates increases the temptation to lend money instead of spending.
Re: Fed increases target rate to 3.75-4.00%
#14"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)
It won't, because the current inflation is supplyside-driven, not expectations-driven. But if we transition to an expectations-driven inflation regime, that's really bad, because it would require much more severe action to bring under control. The Fed is doing this as a preventive measure to keep expectations-driven inflation from taking hold. It sucks, but it's being done to prevent more pain later.
Re: Fed increases target rate to 3.75-4.00%
#15"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)
More expensive credit to businesses leads to less investment and growth leading to less hiring leading to higher unemployment. Higher unemployment means some people won't be able to afford food and gas lowering the demand for food and gas.
That's the theory anyway, they don't say it in plain terms like that though.
Re: Fed increases target rate to 3.75-4.00%
#16I just started to have enough money for a decent downpayment on a house when all this rate hike started. Now I'm basically priced out.
Re: Fed increases target rate to 3.75-4.00%
#17"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)
By sucking the money out of the system.
It reduces demand - in the modern world the prices are disconnected from cost of production - instead reflect the demand for that product - how much can it be sold for
Re: Fed increases target rate to 3.75-4.00%
#18"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)
It won't reduce the prices. It will merely reduce the rate of increase of those prices.
If done enough, it may reduce prices; we may not want that though.
Re: Fed increases target rate to 3.75-4.00%
#19"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)
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Re: Fed increases target rate to 3.75-4.00%
#20"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)
More expensive credit to businesses leads to less investment and growth leading to less hiring leading to higher unemployment. Higher unemployment means some people won't be able to afford food and gas lowering the demand for food and gas. That's the theory anyway, they don't say it in plain terms like that though.
or it could mean people waste a lot less - we all know in the western world waste is gigantic