Posted on 09/18/2019 12:00:01 PM PDT by BeauBo
The central bank announces it’s taking down its benchmark overnight lending rate to a target range of 1.75% to 2%.
According to the Fed’s “dot plot” of individual expectations, five members thought the FOMC should have held its previous range of 2% to 2.25%, five approved of the 25 basis point cut but keeping rates there through the rest of the year, and seven favored at least one more cut this year.
The Federal Reserve approved a much-anticipated quarter-point interest rate cut Wednesday but offered few indications that further reductions are ahead as members split on what to do next...
Major U.S. stock exchanges dropped after the decision was announced...
President Donald Trump, who has called Fed policymakers “boneheads” for not cutting rates enough, tore into Wednesday’s decision, saying Chairman Jay Powell and his colleagues have “no ‘guts.’” Trump says the Fed is risking U.S. competitiveness by keeping rates substantially higher than most of the rest of the developed world. The committee again cites “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary rationale for Wednesday’s cut.
(Excerpt) Read more at cnbc.com ...
See my 20.
President Trump was correct in 2016:
https://www.realclearpolitics.com/video/2016/09/06/trump_the_fed_keeping_interest_rates_artificially_low_so_the_economy_doesnt_go_down.html
The “race to zero” will not end well.
“Why are they cutting rates if the economy is going strong?”
FED has tow mandates to reach:
Full employment, 2% core inflation.
Full employment reached.
Core inflation below target at 1.6%.
So, they cut as that will hopefully increase inflation a bit.
Basically, everything is going well and everyone should get on with their lives and stop obsessing over the FED.
Your concise answer confirms what I learned and expressed in my post #20.
Multiple sources the past 3 years have said the biggest influence on GDP now and in the future is demographics.
People forget that a major part of the mortgage crisis was that institutions that needed to be earning about 8-9% return on their money, were forced to buy risky subprime mortgage MBS, because that was all that paid enough.
We need to get back up to an interest rate where both borrowers and lenders can survive.
“Market dropped. I thought it is supposed to go up after a rate cut. So, why did it drop now?”
1. Expected/hoped for more.
2. Comments indicated a low expectation for much more (just one more quarter point later this year)
3. Yesterday there was big surge in demand for private lending (Repo) which is sign of Global demand for dollars. Those pressures push interest rates upward, potentially offsetting Fed rate cuts. That could have had an effect on the market today.
Every knows lowering interest rates has no stimulative effect on the economy. /sarc
The speaker last night was agreeing with you. In general no president should be influencing the Fed. It was designed to be independent. Whether it actually is apolitical I am not sure. I am still not quite sure I understand why it was at or near 0% for all of the Obama years.
“One of the thoughts as to why Trump wants to head back to zero is because that is where other countries are now”
Yes, there is that. Higher interest rates here means that global capital buys more of those higher-yielding US bonds, driving up the demand for/price of the dollar. A stronger dollar in turn makes US goods less competitive, and imports more competitive, hurting our trade balance.
Also, lower rates just stimulate the economy broadly in the short term. Every President would want rate cuts the year before an election.
Man, you are a hoot. That apolitical train left the station a long time ago.
Another reason the Fed believes the US economy will only grow moderately is because of “trade uncertainties.”
But wait, if China, Germany, France, have weak economies and the USA has a “moderate growth” economy, why would “they” risk a trade war with the USA? China needs to settle the trade deal with the US or it will have serious employment and economic problems that oould result in internal revolution (look at Hong Kong). Europe if they snub their nose at US trade sanctions against Iran, will face serious financial problems for their companies. That in turn will really ruin the EU economy.
So are those countries that the Fed fears will have trade war uncertainty do something that is likely suicidal? I don't think so!
Pretty sure it was at 0% for all those years, because, they’re political.
Dude, I said upfront that I wasn’t an expert in all things economic. Why dont you add to the conversation. Explain to me why the fed kept the rate at zero for all the Obama years if that’s actually bad for the recovery? I agree it seems like someone was directing them thinking incorrectly it would stimulate. But the Fed would know better, wouldn’t it? Kind of makes it seems like the Fed worked against Obama, which I find hard to believe.
I am asking why the fed kept the rate at zero for all the Obama years if that’s actually bad for the recovery? I agree it seems like someone was directing them thinking incorrectly it would stimulate. But the Fed would know better, wouldn’t it? Kind of makes it seems like the Fed worked against Obama, which I find hard to believe.
One of the things I learned from the presentation I spoke about in post 20 was that only 10% of our economy is trade. Basically as things are today we could let the whole world go to hell and we would still be ok in the US.
Of that 10% our biggest trade partner is Mexico. So even China isn’t all that big a influence. One thought last night was that China deal or no China deal, we win. Right now with no deal, due to tariffs, companies are moving to other Asian countries. If we get a deal, the imbalance gets corrected. The cost of china goods to consumers here in the USA has not gone up as people predicted. So Trump possibly doesn’t care if he closes a deal or not. We are getting the cheap goods from Thailand and Vietnam now. We have no incentive to give in on our demands regarding intellectual property theft or Chinese tariffs on US goods.
thanks for that response
I retired early at 46 in 2003 expecting my savings to go a long long way. 0% interest has not helped at all. I was expecting an annual income from my savings vs zero interest.
??? Why? If the economy is gang busters why?
One last thing. Its been maybe 13 years or so that interest rates have been super low. Pension funds, who were counting on 7-9% returns for those years, are drastically underfunded. I believe this is why cities with underfunded pensions like Chicago are trying to take over electric utilities. If they do that they will get a new source of income to route directly to their pension funds.
Oh is GDP that bad? If it is I am 100% wrong about my position on corporate tax cuts.
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