Federal Reserve to increase interest rates by 75 basis points • Hacker News Board

Re: Federal Reserve to increase interest rates by 75 basis points

#131

Post by bjt » Wed, Jul 27, 2022, 6:54 PM UTC

colinsane wrote: post #56

anyone know of bullet-proof analyses into central banking policy out there? after dealing with crypto projects that offer high interest rates, and do so by just inflating their token supply, fed policy seems magical to me. the fed’s offering you yield on your dollars, and that yield comes from printing new dollars (right? there’s no tax increase as part of this announcement). your share of dollars stays constant. so…

The Federal Reserve doesn't print money. The Treasury does that.

The Fed does two things:

1. They lend money to banks through what's called their "discount window". https://en.wikipedia.org/wiki/Discount_window 2. They buy and sell US Treasury Bonds on the open market until interest rates hit the target that they've set. https://en.wikipedia.org/wiki/Federal_Open_Market_Committee

Today's announcement is about using that second mechanism.

Re: Federal Reserve to increase interest rates by 75 basis points

#132

Post by thesausageking » Wed, Jul 27, 2022, 6:54 PM UTC

colinsane wrote: post #56

anyone know of bullet-proof analyses into central banking policy out there? after dealing with crypto projects that offer high interest rates, and do so by just inflating their token supply, fed policy seems magical to me. the fed’s offering you yield on your dollars, and that yield comes from printing new dollars (right? there’s no tax increase as part of this announcement). your share of dollars stays constant. so…

This article by Lyn Alden is the best on the dollar as the US Currency Reserve I've read:

https://www.lynalden.com/fraying-petrodollar-system/

Re: Federal Reserve to increase interest rates by 75 basis points

#133

Post by [deleted] » Wed, Jul 27, 2022, 6:54 PM UTC

pdonis wrote: post #7

Is 75 basis points correct? The actual press release appears to describe an increase from 2-1/4 percent to 2-1/2 percent, which is only 25 basis points. It says it "anticipates that ongoing changes in the target range will be appropriate", but that's not the same as making additional changes now.

[deleted]

Re: Federal Reserve to increase interest rates by 75 basis points

#134

Post by JumpCrisscross » Wed, Jul 27, 2022, 6:54 PM UTC

throwaway4good wrote: post #96

mywittyname wrote: post #47

I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many products and services that people rely on and the only way I see the situation improving is if supplies increase, maybe dramatically. It's too difficult to curb demand for things like food and housing if the population is growing. Those are things we just need t…

The Russians curbed inflation at the start of the war quite effectively ... by raising interest rates to 20%.

> by raising interest rates to 20%

And confiscating hard currency and implementing capital controls.

Re: Federal Reserve to increase interest rates by 75 basis points

#135

Post by powerhour » Wed, Jul 27, 2022, 6:54 PM UTC

thatguy0900 wrote: post #107

BitwiseFool wrote: post #83

Earlier quoted context omitted.

What I find tragic is that 'we' had all this time to gradually increase the retirement age but didn't do so. I can totally understand the political backlash of trying to immediately increase the retirement age, as old people vote and young people don't. However I feel like forward looking legislators could have passed gradual increases on future generations. If we know life expectancy is gradually going upwards, why…

Young people arnt jazzed about raising retirement either. I would like to retire some day as well. Not looking forward to the future where I get to "retire" at 80 or 90 because the generation before me couldn't handle a budget.

Agreed. Having to work to 70 and possibly beyond because some employers haven't figured out how to make their jobs not completely shitty seems like a pretty raw deal.

Re: Federal Reserve to increase interest rates by 75 basis points

#136

Post by notch656a » Wed, Jul 27, 2022, 6:55 PM UTC

zeroonetwothree wrote: post #114

nodesocket wrote: post #10

Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; learn economics 101) and drop student debt forgiveness nonsense. The fed is trying to curb inflation, while politicians are trying to get re-elected at any cost, fighting the fed.

CA isn’t printing money. If they don’t use it for this it will be used for something else. Now perhaps specifically this use of money is especially bad but it’s not obvious that’s the case.

In effect they are. When you gain the stimulus money from progressive taxes but return the money in a relatively flat (less progressive) way (like $X dollars for everyone meeting a fairly common threshold) then the velocity of the money changes. When goods/service/estate remains equal, change in velocity and change in money printed both have the inflationary/deflationary response.

Re: Federal Reserve to increase interest rates by 75 basis points

#137

Post by vinay_ys » Wed, Jul 27, 2022, 6:55 PM UTC

snarf21 wrote: post #110

mywittyname wrote: post #47

I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many products and services that people rely on and the only way I see the situation improving is if supplies increase, maybe dramatically. It's too difficult to curb demand for things like food and housing if the population is growing. Those are things we just need t…

I feel like until we catch up on covid demand, there will be short supply and inflation on the shortages. But let's not forget that the oil companies are price gouging now as punishment against growing green technology. This greatly increases the transportation cost of all goods and their components and can put upward pressure on wages to meet workers higher bills. I agree that raising interest rates will slow inflat…

Oil prices being high is a good thing for acceleration of renewable/green tech. Also, oil prices are a functional geo-politics.

Re: Federal Reserve to increase interest rates by 75 basis points

#138

Post by throw_m239339 » Wed, Jul 27, 2022, 6:55 PM UTC

pm90 wrote: post #76

ParksNet wrote: post #66

Earlier quoted context omitted.

Easiest way to increase labor supply is to immediately increase the retirement age to 70. Welfare and retirement systems across the West are insolvent at current settings anyway.

No. Easiest by far is to relax immigration restrictions.

> No. Easiest by far is to relax immigration restrictions.

Easiest way to make citizens of a country vote for anti-immigration parties is to significantly increase immigration.

Re: Federal Reserve to increase interest rates by 75 basis points

#139

Post by JamesBarney » Wed, Jul 27, 2022, 6:55 PM UTC

tcmart14 wrote: post #94

fenek wrote: post #29

I don't get it. The price of gas I'm paying in the US, has dropped by 20% in the last month or so. That seems to indicate that prices are going back to normal. What prices is fed concerned about?

I am not an economic expert, so you may take with a grain of salt. Gases, prices, a complex topic. From my understanding there are/were two things causing increases in price. First is just inflation across the board that affects all items. The second is the oil specific problem of, there is plenty of crude oil, but not enough was being refined, leading to a lack of supply for actual gasoline. Some measures have been…

There is also the supply side constraints of businesses reducing their capacity or not investing in new capacity during covid.

Re: Federal Reserve to increase interest rates by 75 basis points

#140

Post by paulpauper » Wed, Jul 27, 2022, 6:55 PM UTC

mywittyname wrote: post #47

I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many products and services that people rely on and the only way I see the situation improving is if supplies increase, maybe dramatically. It's too difficult to curb demand for things like food and housing if the population is growing. Those are things we just need t…

If prices rise 8% yoy and then 2% the next year, the stated inflation rate is 2% even though the 8% is locked in. So there is both higher price levels yet low inflation. Weird how inflation works.