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

US Federal Reserve raises interest rates for first time since 2018

theguardian.com

Post reply on HN
Print view View original

41–50 of 693 posts

Re: US Federal Reserve raises interest rates for first time since 2018

#41

Post by civilized »

arawde wrote: post #21

Most surprising part of this FOMC had to be when Powell said "we would like to slow demand" during the press conference, you don't usually hear the quiet part out loud like that from this Fed chair. Also shift upwards in PCE in the SEP, plus the dots, all seems appropriately hawkish

> you don't usually hear the quiet part out loud like that from this Fed chair

Is it implying / could be construed in some negative way? Like, "slow demand" means "poor people need to buy less", or something?

Re: US Federal Reserve raises interest rates for first time since 2018

#42

Post by ceejayoz »

tamaharbor wrote: post #28

We had soaring inflation in the early 80’s, but at that time loan interest rates and certificate of deposit rates were much higher than they are now. Does anyone know why the difference?

They don't raise rates rapidly, as that can cause a shock. They're expecting to dribble small increases out regularly over the next year.

If you chart inflation and interest rates you'll see the close relationship: https://www.gzeromedia.com/the-graphic-truth-50-years-of-us-...

Re: US Federal Reserve raises interest rates for first time since 2018

#43

Post by twh270 »

adamhp wrote: post #25
whoseonthat wrote: post #7

Earlier quoted context omitted.

It seems interest rates lower during recessions. Right now we are already low and are raising which seems to be a different pattern. Is lowering interest rates a method to overcome a recession?

Lowering interest rates makes capital cheaper, which does spur investment and thus economic development, so, it can certainly have that effect given the right circumstances. But keep it too low, too long, and you see money start flying around too quickly, getting a little too loose because everyone wants to get theirs, and then they start inventing things like mortgage-backed securities and everyone starts over-lever…

"Money is cheap" yes, also "you can buy a house if you can fog a mirror". (Buy as in acquire a piece of paper that says you'll pay $$$$ per month to whoever holds the note.)

Re: US Federal Reserve raises interest rates for first time since 2018

#44

Post by bequanna »

chipgap98 wrote: post #38
bequanna wrote: post #30

Earlier quoted context omitted.

Could they go any slower? The consensus seems to be that this is far too little way too late.

Consensus from who?

Every person in the US who has had their purchasing power destroyed over the past ~18 months.

Unfortunately, most people were/are too drunk on (maybe temporary) housing and stock market gains to care.

Cheap money, free money and rampant speculation could all have easily been cut off a year ago and we would have had a much “softer landing”. Now we’re in a much more precarious position and may end up fighting stagflation possibly causing years long general economic malaise.

…but hey, Zillow said my house is worth $XXX!!!

Re: US Federal Reserve raises interest rates for first time since 2018

#45

Post by InitialLastName »

downrightmike wrote: post #14
whoseonthat wrote: post #7

Earlier quoted context omitted.

It seems interest rates lower during recessions. Right now we are already low and are raising which seems to be a different pattern. Is lowering interest rates a method to overcome a recession?

Yes, because it increases the money supply. We are supposed to tighten when things are good by raising rates. At this point they need to raise rates to pull money out of the system. Because with covid, not only did we cut rates, we put in a HUGE amount of money and that was really irresponsible. And now we are seeing the repercussions with inflation lowering the value of the dollar.

We should recall that not only did the US cut rates and spend a lot of money through the covid recession, when things were bad, it ignored that first bit of advice before Covid when things were good (it's hard to remember now how hot the economy was in 2016-2019, but it was really hot), by cutting taxes and continuing to print money and keep the rates low to cover it. As the tax cut detractors correctly predicted, those tax cuts (and the growth that didn't happen enough to cover them) reduced the US's leverage to respond when an actual crisis came up.

Re: US Federal Reserve raises interest rates for first time since 2018

#46

Post by jjoonathan »

phkahler wrote: post #29
whoseonthat wrote: post #7

Earlier quoted context omitted.

It seems interest rates lower during recessions. Right now we are already low and are raising which seems to be a different pattern. Is lowering interest rates a method to overcome a recession?

>> Is lowering interest rates a method to overcome a recession? It is claimed to be. The idea is that with lower interest rate, companies and people will be more likely to borrow money to spend and that will boost the economy. I for one do not really believe this to be true. I suspect it's the act of lowering rates that gives a temporary boost until things rebalance. In other words, economic activity has some depende…

> economic activity has some dependence on the derivative of interest rates

If interest rates go down, it's easy to roll over old promises and make new ones besides. If interest rates go up, promises must be kept or the business will fold.

At the end of every business cycle, interest rates are low and there are lots of unprofitable "zombie companies" that operate by simply rolling over their promises. In order for the economy to grow, interest rates must be hiked to do a controlled burn and remove this underbrush. Zombie companies have to actually die. This is painful at the best of times.

Political will formation will be doubly hard this time around because A. there is more national debt (so we probably need to soft-default on it and inflate it down, first) and B. last time around Carter did the burn and Reagan got the growth and the credit, so the question is who wants to be Carter this time around.

Re: US Federal Reserve raises interest rates for first time since 2018

#47

Post by throw0101a »

nimbius wrote: post #37
lapetitejort wrote: post #3

If you're a dummy like me, 25 bps means 0.25%.

imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greater inflation by Q4. What i really think are needed --Clinton era 4-5% rates-- are all but taboo to the market post-housing-collapse. nearly a year ago the fed was cheerleading "transient" inflation in an attempt to avoid culpability for the corporate credit bub…

> imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greater inflation by Q4.

How much of the current inflation has anything to do with interest rates? You think oil/gas prices will care much about the Fed's action?

And we still have supply chain issue before all geopolitical problems even started: just try asking network vendors what their lead times are for switches and routers.

For consumers, Ford is shipping cars with missing functionality:

* https://arstechnica.com/cars/2022/03/ford-ships-explorers-mi...

Re: US Federal Reserve raises interest rates for first time since 2018

#48

Post by dragonwriter »

arawde wrote: post #21

Most surprising part of this FOMC had to be when Powell said "we would like to slow demand" during the press conference, you don't usually hear the quiet part out loud like that from this Fed chair. Also shift upwards in PCE in the SEP, plus the dots, all seems appropriately hawkish

> Most surprising part of this FOMC had to be when Powell said "we would like to slow demand" during the press conference, you don't usually hear the quiet part out loud like that from this Fed chair.

That's...not really a “quiet part”, it's the widely acknowledge, overt nature of managing inflation. That the Fed’s dual mandate involves employment and price stability, and that those are in tension because controlling inflation often involves mitigating demand, while promoting employment enhances demand is not viewed as a secret. It’s like Fed 101, and Fed board members (chair or not) very often do not walk on eggshells about it.

Re: US Federal Reserve raises interest rates for first time since 2018

#49

Post by blagie »

phkahler wrote: post #29
whoseonthat wrote: post #7

Earlier quoted context omitted.

It seems interest rates lower during recessions. Right now we are already low and are raising which seems to be a different pattern. Is lowering interest rates a method to overcome a recession?

>> Is lowering interest rates a method to overcome a recession? It is claimed to be. The idea is that with lower interest rate, companies and people will be more likely to borrow money to spend and that will boost the economy. I for one do not really believe this to be true. I suspect it's the act of lowering rates that gives a temporary boost until things rebalance. In other words, economic activity has some depende…

I think what you're describing is exactly what's claimed. /Lowering/ interest rates leads to growth, not low interest rates. I don't think many economists would dispute that.

The general model is that interest rates, lowering taxes, and increasing government spending are tools for shoring up the economy during a recession. During a growth period, interest rates should be raised, government spending lowered, and taxes raised, so we have room to adjust them for the next recession. This can, in theory, smooth out the boom-bust cycle which otherwise naturally results.

The problem is that we rarely raise interest rates, reduce spending, or raise taxes, since it's politically unpopular. Many of these tools are harmful; for example, outside a few domains like infrastructure and medicine, long-term high government spending tends to /harm/ the economy.

Re: US Federal Reserve raises interest rates for first time since 2018

#50

Post by qwertyuiop_ »

pclmulqdq wrote: post #6

It's worth noting that this is actually a rate target, not the rate. Previously, the rate floated between 0% and 0.25% based on a market. Now, it is going to be between 0.25% and 0.5%.

First I have heard of this and quite interesting to learn. Could you explain the difference ? Does this mean they are going to implement the rate increase some point in future ala target ?
Post reply on HN