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The news came out at 2 pm eastern time and you see how the stock market reacted when Powell said they will continue to fight inflation .
EU inflation is now 10%
Market was way up after the announcement but before Powell spoke. Then market went down. Literally over Powell saying the most predictable thing that they won't be early in scaling back rate increases. Fed had no credibility six months ago and now the world moves on every word he says. That's how you get respect with the markets.
But the media needs to kill time it's calling it a "whopping" increase. Yes, this is the word in the article I just read.
The Fed has made its intentions clear on what their goals are.
Powell said clearly that he wants to see the Core Personal Consumption Expenditure Price Index (core PCE) below the interest rate. Currently the core PCE is at 5.09%. After that remark, the market rate for the 1Y T-Bill increased to 4.75%.
That signals an expectation of another 75 basis points increase in the policy rate and an at least 25 tenths percentage points decrease in the core PCE over the next 12 months.
Though achievable, my gut feeling is that the risks to that expectation are on the upside.
In fact, early this morning the 2Y T-Note market rate has gone up to 4.90%.
Wish they'd bumped it 1.5%. But Wall St. is more important than Main St.
How's that? The higher rates are bumping up mortgage rates, credit card and loan rates, it's hurting retirees and their 401k/IRAs? I'm very curious how a higher interest rate helps Main St.
How's that? The higher rates are bumping up mortgage rates, credit card and loan rates, it's hurting retirees and their 401k/IRAs? I'm very curious how a higher interest rate helps Main St.
Hey , don’t let facts get in the way of a good story line.
Most Americans benefited from low rates ..interest free auto loans , lower debt service , assets did better …..
Only those who did not take the feds heads up about using savings accounts did poorly ..had they even switched to bonds they did well .
So yeah Main Street definitely benefited more from low rates
The issue is that this inflation has stemmed from inflationary fiscal policy and COVID/war related issues. Hiking interest rates isn't going to address supply shortages, labor shortages, war-related energy issues, etc.
The days of low single digit interest rates are over for a long time. We had like 14 years of historically low rates. We are just getting back to normal now but it will be painful for a lot of people. Glad my properties are paid off and I have no debt.
The issue is that this inflation has stemmed from inflationary fiscal policy and COVID/war related issues. Hiking interest rates isn't going to address supply shortages, labor shortages, war-related energy issues, etc.
Exactly, raising interest rates does absolutely nothing to solve supply chain and demographic realities.
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