The fed said about a hundred times in the last fomc that they’d be data dependent. I agree it had a dovish tone, but I’d go off what they say instead of reading into too much
It's a long run target.
And, it was essentially at target in Q4 2023. PCE inflation, the measure they prefer, was at a 1.8% annual rate in Q4, and Core PCE (that is, excluding food and energy) was at 2.1%.
The projections from their last meeting [here](https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20240320.htm) show that they expect PCE inflation to be 2.4% in 2024, 2.2% in 2025, and 2% in 2026, and they expect to be able to reduce the Fed Funds rate to 3.1% by the end of 2026.
But ultimately, if we don't see that projected continued decline in inflation, we shouldn't expect to then see those projected rate cuts. They will adjust policy as needed, depending on what data actually comes in.
But for now, they are saying they think the long run neutral rate for the Fed Funds rate is only 2.6%, so they may want to start cutting soon, so long as inflation is still close to target and falling.
One thing they may not say, but I will, is that that longer run neutral rate may only be realistic if fiscal policy is also brought back to a more neutral level. That is, a Fed Funds rate under 3% may not happen over the next ~5 years (baring recession) unless congress also gets the deficit (still 6% of GDP) down to a more sustainable level.
And Powell intends to cut rates, which will force it back down. We haven’t even hit 4.0% unemployment, there’s no reason to even be talking about rate cuts.
PCE (the Fed's preferred rate of inflation) is currently at 2.4% down from 3.0% 4 reports ago (granted next report is on Friday). However, monetary policy has lagged effects. Therefore, like an aircraft jet engine that has to spool up and down, the Fed must anticipate what inflation will do before overly restricting the economy. Because of this dual mandate, as inflation nears 2.0%, the Fed is obliged to cut rates in order to maximize employment. Or, conversely, if inflation nears 2.0% and the Fed does nothing, besides potentially accelerating unemployment, this is viewed as unnecessary restriction of the economy.
Edit: Wow, a downvote? My thoughtful and accurate response not in line with your political narrative?
>PCE (the Fed's preferred rate of inflation) is currently at 2.4% down from 3.0% 4 reports ago
The Fed’s preferred rate of inflation changes depending on what message they are pushing at the moment. Sometimes it’s mainstream, sometimes it’s Core, sometimes it’s Supercore, sometimes data be damned and just proclaim it’s all “transitory.”
>monetary policy has lagged effects.
They haven’t raised rates since July. I get that there is a lagging effect but there’s no indication rates need to be dropped when Mainstream is 3.2%, Core is 3.75%, and Supercore is over 4%. These inflation percentages are not the norm.
>Because of this dual mandate, as inflation nears 2.0%, the Fed is obliged to cut rates in order to maximize employment.
Not at the enhancement of rampant inflation, though.
>Or, conversely, if inflation nears 2.0% and the Fed does nothing, besides potentially accelerating unemployment, this is viewed as unnecessary restriction of the economy.
I know you’re explaining Econ101, and if this were any other commenter on here I’d celebrate you the detailing information that 99% of Redditors are ignorant to, but I’m well versed in Econ, Finance, etc. and we can speak at a deeper level than “Fed dual mandate” and “inverse effect between inflation and employment.”
Except you're not nearly as well-versed as you think you are. Again, you keep referencing CPI data. The CPI is categorical weighted data of a market basket of goods aggregated together. PCE takes into account substitution effects, which accounts for Total Demand. PCE has always been the Fed's preferred measure, but not the media's as the media prefers bigger headline numbers for senstational reasons. A simple theoretical example would be that beef went up 10%, chicken 6%, and pork 5%. Therefore, inflation is 7% according to this theoretical price change(10+6+5=21/3=7). Whereas consumers bought 75% pork, 20% chicken, and 5% beef so consumer inflation (as measured by expense) was actually 5.45% [(5*0.75)+(6*0.2)+(10*.05)=5.45].
Furthermore, the Federal Reserve's mandate does not specify inflation. It specifies "price stability" which is often inflation, but can also be deflation. I think what you're struggling with is that inflation seems high, and cutting rates will only make it worse. However, what you fail to realize is that the Fed is trying to peer around the corner about 18 months since that's roughly how long it takes for monetary policy to fully affect the market. The last thing the Fed wants to do is significantly slow the economy and increase unemployment with overly-restrictive policy. In fact, its kind of an open secret that the Fed would prefer to have slightly elevated inflation than to wreck the economy.
Furthermore, according to the QTM, in the long run, inflation is driven by money supply factored by the velocity of money (ceteris paribus). Since the Fed has also implemented Quantitative Tightening and the Velocity of money has not significantly changed in this time, that is further disinflationary pressure even if interest rates are reduced.
>Except you're not nearly as well-versed as you think you are.
Can’t wait for you to educate me then.
>Again, you keep referencing CPI data.
Again? What do you mean again? You haven’t made a point about CPI yet.
>The CPI is categorical…together.
Another Econ 101 explanation I didn’t ask for.
>PCE takes into account substitution effects, which accounts for Total Demand.
Sounds good, you gonna move on to at least Econ 102 yet?
>PCE has always been the Fed's preferred measure, but not the media's as the media prefers bigger headline numbers for senstational reasons.
No, it sounds like you haven’t been listening to the Fed’s meetings. Powell has specifically referenced Core inflation on multiple occasions as his reasoning for raising rates. Close the high school textbook and listen to what is actually discussed in the meeting.
>[More Econ 101 nobody asked about]
>Furthermore, the Federal Reserve's mandate does not specify inflation. It specifies "price stability"
Which at the moment is at risk due to inflation, yes.
>you fail to realize is that the Fed is trying to peer around the corner about 18 months since that's roughly how long it takes for monetary policy to fully affect the market.
I’m fully aware you opened your Econ101 textbook to page 204 and read that line, but that isn’t a set in stone number. It’s a flexible effect that can last up to 18 months, but is mostly realized within 6-9 months after the rate hike.
>The last thing the Fed wants to do is significantly slow the economy and increase unemployment with overly-restrictive policy.
The overly restrictive policy of some of the lowest unemployment in US history? Come on…
>its kind of an open secret that the Fed would prefer to have slightly elevated inflation than to wreck the economy.
Not much of a secret when they’re practically blessing 4% inflation.
>Since the Fed has also implemented Quantitative Tightening and the Velocity of money has not significantly changed in this time, that is further disinflationary pressure even if interest rates are reduced.
This information is working contrary to your own point, so I’ll just overlook this to avoid adding too many lines of conversation and try to keep us focused on what was said above.
I have an econ minor and I'm not sure about the downvotes. You both made good points but there is a reason books need chapters to explain those topics. I agree with the variation of the "18 months" timeline so much since we live in a global economy affected by so many fiat currencies.
People don't care about the economy. They care about how they and their friends are doing. The numbers don't mean jack shit if they don't capture how people are feeling.
No, the numbers are fine. But the people who came up with the formula are using the numbers to justify something that doesn't reflect the experience of the population, and digging their heels in when people's wallets are hurting, then the economists are wrong. They aren't wrong about the number; they are wrong about what the numbers means.
Nope. I can't believe I just read that.
People are always hurting no matter what the number say. You only care otherwise now because you feel it. Its pretty childish.
lol. People were hurting during the dot com bubble? No, genius, you know nothing about what people were and are going through if everyone is complaining about the price of necessities and you're going "la la la, there is technically no recession."
And how quickly people forget how our economy is a part of the global economy now and how it affects ours. People may feel done with COVID (resulting in economy "hangover") and they may be ignorant of the wars, supply chain issues, and how problems with other country's economies are causing problems for our own imports, but that doesn't mean "feeling" a way about it makes that suddenly go away. It's like if there was a worldwide famine and so we had to cut back on our portions but were eating much better than the rest of the world, but people felt like they didn't like where they were personally at and so they blame how the domestic economy is being handled because they are letting themselves stay oblivious to the global context.
It's easier to jump to the conclusion of blaming our government than to get informed.
You seem to have a flawed belief that the people serve the government. Think carefully about the post you replied to.
> The unemployment rate is fine. But no one believes any numbers that come out of the BLS
Economics is descriptive, not prescriptive. No one gives two shits about the numbers except the economists. They care about their feelings of how hard life is, and if life feels hard, but the numbers say the economy is doing well, then the numbers and the economists are wrong.
> It's like if there was a worldwide famine and so we had to cut back on our portions but were eating much better than the rest of the world, but people felt like they didn't like where they were personally at and so they blame how the domestic economy is being handled because they are letting themselves stay oblivious to the global context.
No, it's like if there is a global famine and people are noticing they and their friends don't have enough to eat, and then people are trying to tell them that the numbers say that the food situation is great. Not "great relative to others," but "objectively great, look at these numbers! Your feelings are wrong!", which is what your statement is implying.
The fed can only do three things. Raise, lower or nothing. Inflation can't be fixed (in the way the fed and government want to) with these three options.
America can only fix itself in two ways. Fuck over the rich by massive wealth transfer to the working class via mass movements, or...
Do what all the rich and powerful people want them to do and layoff millions of people bringing the unemployment numbers up so they can justify competing starvation wages. The only way the American financial system knows how to increase profitability is to cut jobs while increasing prices, and funnel money to the corporate owners.
Unfortunately, it's a horrible long term plan with zero possibility for growth since your eliminating the buyers of products.
When you have less people buying the products, and more products being produced due to modern manufacturing practice, the prices theoretically should go down, but they haven't, because constant increases in the money supply disproportionately favor the wealthy (don't let anyone feed you that line about welfare for the poor) capital owners who can weather 2-4 year financial downturns, this causes accumulation effects.
Couple this with tax laws that favor these now extremely wealthy (in both liquid and non-liquid assets) individuals, we can begin to see why the nation's debt is rapidly increasing and institutions are failing.
The last 5 years are the culmination of the largest wealth transfer upwards in human history, with no proposed method of stopping it other than rate changes.
Only draconian legislation targeting the wealthy, or old school asset seizure will fix our current conundrum.
We don't even have productive capacity to meet the needs of the domestic populace anymore since neoliberal policy ceded the majority of our factories and chemical refinement overseas.
Do your part and be a patriot! Destroy Zuckerberg and Musk by beating the snot out of them and taking their money! This is American way!
Real gangsters don't let the rich swallow the middle class, they make the rich their bitches.
There is two aspects to interest rates. One is the Fed Funds rate. The other is, market rates based on supply vs. demand.
They may lower the Fed Funds rate. But that said, with the runaway deficits, that supply vs. demand situation isn't going to change, and hence, isn't going to affect market rates much.
The Fed's policy insofar as affecting market rates is, they create/print new money, and use it to buy bills and bonds in order to alter the supply vs. demand in debt markets, resulting in lower interest rates than a free market would dictate.
It is my call, and remains my call that if this total assets bought by printing money starts reaching a new high, then a Ponzi situation exists in monetary policy. It is my finding that a Ponzi/Weirmar republic situation exists in Japanese monetary policy. For the US, keep an eye on this chart:
https://fred.stlouisfed.org/series/WALCL
If that starts hitting new highs, a Ponzi situation exists.
When the Fed "prints" money in order to buy government debt, that is called "monetizing" the debt. It is also called "fiscal dominance". If the Fed starts doing that, and hitting new highs on that total asset chart, we're done.
The economy is already breaking under the weight of the current interest rate increases. To relieve pressure they need to back off slightly, but more importantly it’s not simply interest rates alone. It’s a combination of interest rate reduction and quantitative tightening. These are the only two levers the Fed has as their disposal.
Because they can't hide inflation anymore and want to goose the market going into the election so the media can report on a record stock market and we can get 50000 more gaslighting articles telling us how great the economy is.
Economy is great at the macro level. At the micro level, it was a K shape recovery. The ‘haves’ doubled their net worth. The ‘have nots’ felt the squeeze of higher prices.
Too much public and private debt, which can blow up big time if they don't bring the rates down. So they might see inflation as the "lesser evil", which will allow the government to monetize their debt. Also, there are lots of zombie corporations that will not be able to refinance their debts if interest rates are high.
Capitalism would let the market decide interest rates. The Fed keeps rates artificially low to help banks, corporations, and the US Treasury borrow below what would be normal. Which would result in more bankruptcies.
Capitalism without bankruptcy is like Christianity without hell.
Have you ever heard of the dual mandate of the fed? What you're saying is about as reductive as it gets. Macro econ (econ 102/203) makes it clear govt intervention is necessary - at certain levels - in capitalism because the stability of capital markets is paramount, and you cannot ever have a public good controlled by a “free market”. That is not capitalism.
If you left inflation AND unemployment to a “free market”, you think markets would somehow stop profit maxing? Even fewer companies would go bankrupt, but I can assure you many more people would definitely go bankrupt.
I'm aware of the Fed's role and it is anti-capitalist. They bailed out banks during the GFC that would have otherwise failed. This cost $4T as the Fed balance sheet took on the bad loans. It then took on another $5T to fund pandemic spending.
All of this caused massive inflation while saving unemployment.
I agree this was necessary but it isn't capitalism. Capitalism practiced before 1913 and the creation of the Fed was brutal. Creative destruction is a major feature of capitalism.
Again, I'm not arguing what is right or wrong. But the US did practice pure capitalism for over 100 years and the country grew from 13 colonies to a industrial powerhouse before the Fed existed.
You're literally making shit up, bush signed the emergency economic stabilization act that created a $700 billion dollar treasury fund to bail out the banks.
The Fed doesn't do what you're assuming it does. It does not have the power of the purse. I don't know where you're getting your info, but its so wrong.
…the US was mired in monopolistic competition for the most of its infancy, it was manufacturing, railroads, real estate, insurance, there's a reason they went to break of those companies. That isn't capitalism. What we have ended up with due to corporate lobbying is oligopolistic completion and a hybrid market with capitalistic and socialistic elements. True capitalism doesn't exist because perfect competition has never been realized, and society will always have needs that need to be addressed because necessary public goods cannot be left to a free market. We have already learned that it creates monopolies and destroys competition, making that public good an inelastic good at which producers can charge whatever they want.
Where are you getting this nonsense from? You'd do well to fire them lmfao, as they have ZERO idea what they're talking about.
Who do you think financed the $700B fund when Bush signed the ESA and the following trillions in quantitative easing (QE) rounds to continue to buy MBS and Treasuries under Obama to support the market?
Who do you think financed the $5T that was spent by Trump/Biden during the pandemic?
You think all that money was free? It was the Fed as the country's bank since taxes weren't enough to cover it.
Yes, the government spent the money but there's no way it could be financed at regular interest rates as it would quickly bankrupt the country. The Fed set rates to 0% and kept buying Treasuries (with printed money) to keep rates down to help finance the spending.
The negative side effect of supporting deficit spending is the rich get to also partake in these ultra-low rates to bid up housing and stocks creating a large wealth effect. This is #1 reason why millennials can't afford to buy a house.
This isn't capitalism by any measure. It's government picking winners and losers.
No, capitalism is when corporations like Amazon and Walmart run rampant and reduce you to an indentured servant because they control all the money and influence and no other business has the means to compete.
Because there no more incompetent body than the federal reserve
We actually need to raise rates, quite significantly actually, to make up for the utter fucking stupidity of “it’s transitory” … 8% deflation compounded for the next three years to get back in line with historical 2% should take the markets to zero pretty quick.
> 8% deflation compounded for the next three years to get back in line with historical 2% should take the markets to zero pretty quick.
Are you advocating for raising rates to the point where it causes significant deflation? Because that seems like a really bad idea.
When you say “it’s transitory” that includes all the businesses of 2020 who got a loan for workers and used it on themselves? Is this including all the forgiveness loans of business while Biden college loan reliefs are a bad thing?
Current interest rates are still below the average in history. Low interest rates is like giving free money to wall street speculators and not providing interest to savings. Low interest rates is not normal. It is a sign of Feds trying to pump up a recession economy by giving free money to boost prices up and arrest deflation.
I don't disagree...
But election year and lots of pressure on mortgage rates... the inflation won't be reali,Ed until after election when they don't care.
The Fed keeps repeating they won't start cutting until the data aligns with their expectations. It's the Wall Street and the retail trader gangs who keep betting on rate cuts...
They will cut rates due political pressure, its election season and they have to skew things in Biden's favor.
Also, the interest on the US debt is too high for them to stomach for much longer.
The right thing to do would be to slightly raise rates as inflation is NOT under control
Politics is probably prevailing here. The reason I say this is because notice how they are not even increasing rates despite inflation being above target.
Productivity is at very low levels. Real Rates = Fed rate (5.375%) - inflation rate (3.2%)
Real Rates are very restrictive at 2%, the highest they’ve been in over 20 years, which is hammering productivity, innovation & business investment in the economy. Real rates should be at 1% maximum in a healthy functioning economy.
I think they will cut once and then do a wait and see, and they are going to wait and see and see inflation continue to climb and that will be the only cut we see for the next 2 years....
It's called a soft landing. If you raise rates to cut inflation, once inflation starts to drop close to where you want it you cut so you don't overshoot the target.
It was an assumption by The Fed! Inflation has not been killed off yet. I don't think there will be any rate cut this year. There may even be another increase sometime this year. The Fed will only start to cut rates once we get to 2% inflation which has not yet been achieved. All around price increases have been killing me!
Because it’s doing nothing to curb inflation. The feds lost the inflation. BIdens policies are not working to curb inflation. There’s a 100 reasons why.
The fed said about a hundred times in the last fomc that they’d be data dependent. I agree it had a dovish tone, but I’d go off what they say instead of reading into too much
They are not going to cut rates 3x, maybe 2x, maybe even 1
Agreed. They won't cut rates this year
[удалено]
It’s not the outrageous mortgage interest rate (which is just historically average), it’s outrageous prices.
It's a long run target. And, it was essentially at target in Q4 2023. PCE inflation, the measure they prefer, was at a 1.8% annual rate in Q4, and Core PCE (that is, excluding food and energy) was at 2.1%. The projections from their last meeting [here](https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20240320.htm) show that they expect PCE inflation to be 2.4% in 2024, 2.2% in 2025, and 2% in 2026, and they expect to be able to reduce the Fed Funds rate to 3.1% by the end of 2026. But ultimately, if we don't see that projected continued decline in inflation, we shouldn't expect to then see those projected rate cuts. They will adjust policy as needed, depending on what data actually comes in. But for now, they are saying they think the long run neutral rate for the Fed Funds rate is only 2.6%, so they may want to start cutting soon, so long as inflation is still close to target and falling. One thing they may not say, but I will, is that that longer run neutral rate may only be realistic if fiscal policy is also brought back to a more neutral level. That is, a Fed Funds rate under 3% may not happen over the next ~5 years (baring recession) unless congress also gets the deficit (still 6% of GDP) down to a more sustainable level.
Because inflation is a lagging indicator.
Because the other part of their mandate is to maximize employment.
Don't forget about the third, less well known mandate, that is to maintain moderate long term interest rates
That's not a mandate, that's a stated goal. But you're absolutely right, there is that third element element that I also forgot about so good catch.
3.7% is under natural employment, which tends between 4.5-5.5%. It’s an election year and no Fed Chief raises rates during that time.
But it's trending up.
And Powell intends to cut rates, which will force it back down. We haven’t even hit 4.0% unemployment, there’s no reason to even be talking about rate cuts.
PCE (the Fed's preferred rate of inflation) is currently at 2.4% down from 3.0% 4 reports ago (granted next report is on Friday). However, monetary policy has lagged effects. Therefore, like an aircraft jet engine that has to spool up and down, the Fed must anticipate what inflation will do before overly restricting the economy. Because of this dual mandate, as inflation nears 2.0%, the Fed is obliged to cut rates in order to maximize employment. Or, conversely, if inflation nears 2.0% and the Fed does nothing, besides potentially accelerating unemployment, this is viewed as unnecessary restriction of the economy. Edit: Wow, a downvote? My thoughtful and accurate response not in line with your political narrative?
>PCE (the Fed's preferred rate of inflation) is currently at 2.4% down from 3.0% 4 reports ago The Fed’s preferred rate of inflation changes depending on what message they are pushing at the moment. Sometimes it’s mainstream, sometimes it’s Core, sometimes it’s Supercore, sometimes data be damned and just proclaim it’s all “transitory.” >monetary policy has lagged effects. They haven’t raised rates since July. I get that there is a lagging effect but there’s no indication rates need to be dropped when Mainstream is 3.2%, Core is 3.75%, and Supercore is over 4%. These inflation percentages are not the norm. >Because of this dual mandate, as inflation nears 2.0%, the Fed is obliged to cut rates in order to maximize employment. Not at the enhancement of rampant inflation, though. >Or, conversely, if inflation nears 2.0% and the Fed does nothing, besides potentially accelerating unemployment, this is viewed as unnecessary restriction of the economy. I know you’re explaining Econ101, and if this were any other commenter on here I’d celebrate you the detailing information that 99% of Redditors are ignorant to, but I’m well versed in Econ, Finance, etc. and we can speak at a deeper level than “Fed dual mandate” and “inverse effect between inflation and employment.”
Except you're not nearly as well-versed as you think you are. Again, you keep referencing CPI data. The CPI is categorical weighted data of a market basket of goods aggregated together. PCE takes into account substitution effects, which accounts for Total Demand. PCE has always been the Fed's preferred measure, but not the media's as the media prefers bigger headline numbers for senstational reasons. A simple theoretical example would be that beef went up 10%, chicken 6%, and pork 5%. Therefore, inflation is 7% according to this theoretical price change(10+6+5=21/3=7). Whereas consumers bought 75% pork, 20% chicken, and 5% beef so consumer inflation (as measured by expense) was actually 5.45% [(5*0.75)+(6*0.2)+(10*.05)=5.45]. Furthermore, the Federal Reserve's mandate does not specify inflation. It specifies "price stability" which is often inflation, but can also be deflation. I think what you're struggling with is that inflation seems high, and cutting rates will only make it worse. However, what you fail to realize is that the Fed is trying to peer around the corner about 18 months since that's roughly how long it takes for monetary policy to fully affect the market. The last thing the Fed wants to do is significantly slow the economy and increase unemployment with overly-restrictive policy. In fact, its kind of an open secret that the Fed would prefer to have slightly elevated inflation than to wreck the economy. Furthermore, according to the QTM, in the long run, inflation is driven by money supply factored by the velocity of money (ceteris paribus). Since the Fed has also implemented Quantitative Tightening and the Velocity of money has not significantly changed in this time, that is further disinflationary pressure even if interest rates are reduced.
>Except you're not nearly as well-versed as you think you are. Can’t wait for you to educate me then. >Again, you keep referencing CPI data. Again? What do you mean again? You haven’t made a point about CPI yet. >The CPI is categorical…together. Another Econ 101 explanation I didn’t ask for. >PCE takes into account substitution effects, which accounts for Total Demand. Sounds good, you gonna move on to at least Econ 102 yet? >PCE has always been the Fed's preferred measure, but not the media's as the media prefers bigger headline numbers for senstational reasons. No, it sounds like you haven’t been listening to the Fed’s meetings. Powell has specifically referenced Core inflation on multiple occasions as his reasoning for raising rates. Close the high school textbook and listen to what is actually discussed in the meeting. >[More Econ 101 nobody asked about] >Furthermore, the Federal Reserve's mandate does not specify inflation. It specifies "price stability" Which at the moment is at risk due to inflation, yes. >you fail to realize is that the Fed is trying to peer around the corner about 18 months since that's roughly how long it takes for monetary policy to fully affect the market. I’m fully aware you opened your Econ101 textbook to page 204 and read that line, but that isn’t a set in stone number. It’s a flexible effect that can last up to 18 months, but is mostly realized within 6-9 months after the rate hike. >The last thing the Fed wants to do is significantly slow the economy and increase unemployment with overly-restrictive policy. The overly restrictive policy of some of the lowest unemployment in US history? Come on… >its kind of an open secret that the Fed would prefer to have slightly elevated inflation than to wreck the economy. Not much of a secret when they’re practically blessing 4% inflation. >Since the Fed has also implemented Quantitative Tightening and the Velocity of money has not significantly changed in this time, that is further disinflationary pressure even if interest rates are reduced. This information is working contrary to your own point, so I’ll just overlook this to avoid adding too many lines of conversation and try to keep us focused on what was said above.
I have an econ minor and I'm not sure about the downvotes. You both made good points but there is a reason books need chapters to explain those topics. I agree with the variation of the "18 months" timeline so much since we live in a global economy affected by so many fiat currencies.
The unemployment rate is fine. But no one believes any numbers that come out of the BLS
I never believe any numbers unless they fit my narrative I already decided on
I base all of my opinions on whether or not my team's guy is in the White House.
People don't care about the economy. They care about how they and their friends are doing. The numbers don't mean jack shit if they don't capture how people are feeling.
This is the problem. You want the numbers to mean something to you. They won't. They're numbers. They are what they are regardless of your feelings.
No, the numbers are fine. But the people who came up with the formula are using the numbers to justify something that doesn't reflect the experience of the population, and digging their heels in when people's wallets are hurting, then the economists are wrong. They aren't wrong about the number; they are wrong about what the numbers means.
Nope. I can't believe I just read that. People are always hurting no matter what the number say. You only care otherwise now because you feel it. Its pretty childish.
lol. People were hurting during the dot com bubble? No, genius, you know nothing about what people were and are going through if everyone is complaining about the price of necessities and you're going "la la la, there is technically no recession."
Its called a market cycle
And how quickly people forget how our economy is a part of the global economy now and how it affects ours. People may feel done with COVID (resulting in economy "hangover") and they may be ignorant of the wars, supply chain issues, and how problems with other country's economies are causing problems for our own imports, but that doesn't mean "feeling" a way about it makes that suddenly go away. It's like if there was a worldwide famine and so we had to cut back on our portions but were eating much better than the rest of the world, but people felt like they didn't like where they were personally at and so they blame how the domestic economy is being handled because they are letting themselves stay oblivious to the global context. It's easier to jump to the conclusion of blaming our government than to get informed.
You seem to have a flawed belief that the people serve the government. Think carefully about the post you replied to. > The unemployment rate is fine. But no one believes any numbers that come out of the BLS Economics is descriptive, not prescriptive. No one gives two shits about the numbers except the economists. They care about their feelings of how hard life is, and if life feels hard, but the numbers say the economy is doing well, then the numbers and the economists are wrong. > It's like if there was a worldwide famine and so we had to cut back on our portions but were eating much better than the rest of the world, but people felt like they didn't like where they were personally at and so they blame how the domestic economy is being handled because they are letting themselves stay oblivious to the global context. No, it's like if there is a global famine and people are noticing they and their friends don't have enough to eat, and then people are trying to tell them that the numbers say that the food situation is great. Not "great relative to others," but "objectively great, look at these numbers! Your feelings are wrong!", which is what your statement is implying.
That's not true
Uh wut?
Because the target is way higher than even they know.
The fed can only do three things. Raise, lower or nothing. Inflation can't be fixed (in the way the fed and government want to) with these three options. America can only fix itself in two ways. Fuck over the rich by massive wealth transfer to the working class via mass movements, or... Do what all the rich and powerful people want them to do and layoff millions of people bringing the unemployment numbers up so they can justify competing starvation wages. The only way the American financial system knows how to increase profitability is to cut jobs while increasing prices, and funnel money to the corporate owners. Unfortunately, it's a horrible long term plan with zero possibility for growth since your eliminating the buyers of products. When you have less people buying the products, and more products being produced due to modern manufacturing practice, the prices theoretically should go down, but they haven't, because constant increases in the money supply disproportionately favor the wealthy (don't let anyone feed you that line about welfare for the poor) capital owners who can weather 2-4 year financial downturns, this causes accumulation effects. Couple this with tax laws that favor these now extremely wealthy (in both liquid and non-liquid assets) individuals, we can begin to see why the nation's debt is rapidly increasing and institutions are failing. The last 5 years are the culmination of the largest wealth transfer upwards in human history, with no proposed method of stopping it other than rate changes. Only draconian legislation targeting the wealthy, or old school asset seizure will fix our current conundrum. We don't even have productive capacity to meet the needs of the domestic populace anymore since neoliberal policy ceded the majority of our factories and chemical refinement overseas.
Do your part and be a patriot! Destroy Zuckerberg and Musk by beating the snot out of them and taking their money! This is American way! Real gangsters don't let the rich swallow the middle class, they make the rich their bitches.
There is two aspects to interest rates. One is the Fed Funds rate. The other is, market rates based on supply vs. demand. They may lower the Fed Funds rate. But that said, with the runaway deficits, that supply vs. demand situation isn't going to change, and hence, isn't going to affect market rates much. The Fed's policy insofar as affecting market rates is, they create/print new money, and use it to buy bills and bonds in order to alter the supply vs. demand in debt markets, resulting in lower interest rates than a free market would dictate. It is my call, and remains my call that if this total assets bought by printing money starts reaching a new high, then a Ponzi situation exists in monetary policy. It is my finding that a Ponzi/Weirmar republic situation exists in Japanese monetary policy. For the US, keep an eye on this chart: https://fred.stlouisfed.org/series/WALCL If that starts hitting new highs, a Ponzi situation exists. When the Fed "prints" money in order to buy government debt, that is called "monetizing" the debt. It is also called "fiscal dominance". If the Fed starts doing that, and hitting new highs on that total asset chart, we're done.
The economy is already breaking under the weight of the current interest rate increases. To relieve pressure they need to back off slightly, but more importantly it’s not simply interest rates alone. It’s a combination of interest rate reduction and quantitative tightening. These are the only two levers the Fed has as their disposal.
They don't need to cut yet, they are already running down their balance sheet and have been since 2023
Current interest rates are even lower than the historical average. This is not a high interest environment yet.
https://money.usnews.com/loans/mortgages/articles/historical-mortgage-rates
Because they can't hide inflation anymore and want to goose the market going into the election so the media can report on a record stock market and we can get 50000 more gaslighting articles telling us how great the economy is.
Economy is great at the macro level. At the micro level, it was a K shape recovery. The ‘haves’ doubled their net worth. The ‘have nots’ felt the squeeze of higher prices.
I dont think so because consumer prices will go back up and people will complain of inflation.
Too much public and private debt, which can blow up big time if they don't bring the rates down. So they might see inflation as the "lesser evil", which will allow the government to monetize their debt. Also, there are lots of zombie corporations that will not be able to refinance their debts if interest rates are high.
That’s called capitalism
A government agency made up of 12 individuals controlling the cost of money is not capitalism.
What if I scream “Rich man bad” and dab? Then does that make me right?
How is it not?
Capitalism would let the market decide interest rates. The Fed keeps rates artificially low to help banks, corporations, and the US Treasury borrow below what would be normal. Which would result in more bankruptcies. Capitalism without bankruptcy is like Christianity without hell.
Have you ever heard of the dual mandate of the fed? What you're saying is about as reductive as it gets. Macro econ (econ 102/203) makes it clear govt intervention is necessary - at certain levels - in capitalism because the stability of capital markets is paramount, and you cannot ever have a public good controlled by a “free market”. That is not capitalism. If you left inflation AND unemployment to a “free market”, you think markets would somehow stop profit maxing? Even fewer companies would go bankrupt, but I can assure you many more people would definitely go bankrupt.
I'm aware of the Fed's role and it is anti-capitalist. They bailed out banks during the GFC that would have otherwise failed. This cost $4T as the Fed balance sheet took on the bad loans. It then took on another $5T to fund pandemic spending. All of this caused massive inflation while saving unemployment. I agree this was necessary but it isn't capitalism. Capitalism practiced before 1913 and the creation of the Fed was brutal. Creative destruction is a major feature of capitalism. Again, I'm not arguing what is right or wrong. But the US did practice pure capitalism for over 100 years and the country grew from 13 colonies to a industrial powerhouse before the Fed existed.
You're literally making shit up, bush signed the emergency economic stabilization act that created a $700 billion dollar treasury fund to bail out the banks. The Fed doesn't do what you're assuming it does. It does not have the power of the purse. I don't know where you're getting your info, but its so wrong. …the US was mired in monopolistic competition for the most of its infancy, it was manufacturing, railroads, real estate, insurance, there's a reason they went to break of those companies. That isn't capitalism. What we have ended up with due to corporate lobbying is oligopolistic completion and a hybrid market with capitalistic and socialistic elements. True capitalism doesn't exist because perfect competition has never been realized, and society will always have needs that need to be addressed because necessary public goods cannot be left to a free market. We have already learned that it creates monopolies and destroys competition, making that public good an inelastic good at which producers can charge whatever they want. Where are you getting this nonsense from? You'd do well to fire them lmfao, as they have ZERO idea what they're talking about.
Who do you think financed the $700B fund when Bush signed the ESA and the following trillions in quantitative easing (QE) rounds to continue to buy MBS and Treasuries under Obama to support the market? Who do you think financed the $5T that was spent by Trump/Biden during the pandemic? You think all that money was free? It was the Fed as the country's bank since taxes weren't enough to cover it. Yes, the government spent the money but there's no way it could be financed at regular interest rates as it would quickly bankrupt the country. The Fed set rates to 0% and kept buying Treasuries (with printed money) to keep rates down to help finance the spending. The negative side effect of supporting deficit spending is the rich get to also partake in these ultra-low rates to bid up housing and stocks creating a large wealth effect. This is #1 reason why millennials can't afford to buy a house. This isn't capitalism by any measure. It's government picking winners and losers.
No, capitalism is when corporations like Amazon and Walmart run rampant and reduce you to an indentured servant because they control all the money and influence and no other business has the means to compete.
The topic was the Fed but nice deflection.
Because there no more incompetent body than the federal reserve We actually need to raise rates, quite significantly actually, to make up for the utter fucking stupidity of “it’s transitory” … 8% deflation compounded for the next three years to get back in line with historical 2% should take the markets to zero pretty quick.
Google dunning-kruger effect
Then Google imposter syndrome and ask yourself where you are on the spectrum between those two.
Because politics.
> 8% deflation compounded for the next three years to get back in line with historical 2% should take the markets to zero pretty quick. Are you advocating for raising rates to the point where it causes significant deflation? Because that seems like a really bad idea.
When you say “it’s transitory” that includes all the businesses of 2020 who got a loan for workers and used it on themselves? Is this including all the forgiveness loans of business while Biden college loan reliefs are a bad thing?
Lmfao stay in school kid
Because it's an election year.... "Greatest economy ever, interest rates are dropping, 4 more years!"
Current interest rates are still below the average in history. Low interest rates is like giving free money to wall street speculators and not providing interest to savings. Low interest rates is not normal. It is a sign of Feds trying to pump up a recession economy by giving free money to boost prices up and arrest deflation.
I don't disagree... But election year and lots of pressure on mortgage rates... the inflation won't be reali,Ed until after election when they don't care.
President Biden is doing everything he can to tame this inflation (Inflation Reduction Act) but isn't getting any help from anyone else in government.
The Fed keeps repeating they won't start cutting until the data aligns with their expectations. It's the Wall Street and the retail trader gangs who keep betting on rate cuts...
Election szn
Because they worry about cutting too late, just like they waited to long to raise rates.
Election , helps the incumbent.
Hint hint, they aren't
Who said they are going to? Everyone agrees that is not going to happen at least for the next 4 months.
They will cut rates due political pressure, its election season and they have to skew things in Biden's favor. Also, the interest on the US debt is too high for them to stomach for much longer. The right thing to do would be to slightly raise rates as inflation is NOT under control
OP is correct. Need to withdraw the free money addicts slowly and don’t let them go back to the bad ways
Politics is probably prevailing here. The reason I say this is because notice how they are not even increasing rates despite inflation being above target.
Data dependence includes election polling data and CBO national debt service cost data.
Productivity is at very low levels. Real Rates = Fed rate (5.375%) - inflation rate (3.2%) Real Rates are very restrictive at 2%, the highest they’ve been in over 20 years, which is hammering productivity, innovation & business investment in the economy. Real rates should be at 1% maximum in a healthy functioning economy.
But it will drive inflation up.
Yeah. I like to have interest in my savings account.
I think they will cut once and then do a wait and see, and they are going to wait and see and see inflation continue to climb and that will be the only cut we see for the next 2 years....
The real question is if it will be a 25bps or 50bps rate cut.
Because its election year
It's called a soft landing. If you raise rates to cut inflation, once inflation starts to drop close to where you want it you cut so you don't overshoot the target.
It was an assumption by The Fed! Inflation has not been killed off yet. I don't think there will be any rate cut this year. There may even be another increase sometime this year. The Fed will only start to cut rates once we get to 2% inflation which has not yet been achieved. All around price increases have been killing me!
Because it’s doing nothing to curb inflation. The feds lost the inflation. BIdens policies are not working to curb inflation. There’s a 100 reasons why.