Posted on 07/26/2022 5:35:03 PM PDT by george76
Chairman Jerome Powell may start offering less guidance about coming rate increases..
Evidence is growing that the Federal Reserve has fallen well behind on inflation and needs to make up for lost time. WSJ’s Dion Rabouin explains how we got here and what the Fed is doing to catch up.
...
After the Federal Reserve lifts its benchmark interest rate on Wednesday, attention will turn to what Chairman Jerome Powell says about a rate increase at the central bank’s meeting in September.
The Fed is likely to raise its federal-funds rate by 0.75 percentage point, to a range between 2.25% and 2.5%, at this week’s meeting. While further rate rises are likely this year, Mr. Powell might be less specific about his expectation for their sizes, according to analysts.
...
Mr. Powell has publicly signaled the central bank’s moves ahead of each policy meeting this year, as it accelerated the pace of removing stimulus to combat soaring inflation.
Immediately after the past two Fed meetings, Mr. Powell specified the expected rate move at the subsequent meeting. In May, he and his colleagues had indicated they would likely raise rates by a half percentage point, or 50 basis points, at their meeting in mid-June. But inflation data released days before the June gathering pointed to a worsening outlook and prompted them to approve a larger 0.75-point rate increase.
After the June meeting, Mr. Powell said officials were most likely to consider rate increases of a half point or 0.75 point at this week’s meeting. He also said the 0.75-point rate rise was “an unusually large one, and I do not expect moves of this size to be common.”
(Excerpt) Read more at wsj.com ...
Fed interest rates should provide a 3% real return to the common peeps on a savings acount.
A 2% inflation target is bogus. It should be a target of 0%.
Way, way, way too late. Now they will over react and keep raising rates until they overshoot what was needed. It’s like these guys never learn from history. Or maybe it’s the fact that they have been playing politics, like every other American agency or department has been.
Near zero percent was crazy in the first place. Real interest should be double digits at this point. In the future it should be mid to high single digits. Easy money is stupid.
“Note the Alternate Inflation Charts..”
If inflation is actually higher, that will make deflationary policies more likely to occur.
Historically the way to cause deflation is to jack up interest rates & cut the money supply.
It causes massive economic pain but lowers pricing on everything.
3% return while prices rise > 10% a year....
Not for the central banks. It is just in time to protect the Federal Reserve syndicate. They are the ones who take a percentage off the top of new money creation. They will pass some of that along to the second-tier financial institutions as they bail them out,
Everybody else is screwed pretty quickly.
But rising interest rates by themselves will not stop inflation. We have seen this movie before. It is called "stagflation". As long as the government can borrow money "ex Nihilo" with treasury bills, the inflation will continue. And government keeps printing money and passing it around to friends.
When you rob Peter to pay Paul, you can always count on support from Paul.
A benign possible reason for that target is they do not want to have deflation, as the target may be aimed at., but difficult to get it exactly correct.
“Easy money is stupid.”
Its not only stupid but very destructive to the overall economy.
Money tends to ‘hang out’ in real estate & equities, to the detriment of other economic sectors during cheap money times.
Interest rates globally should have been raised incrementally starting in 2012.
> Fed interest rates should provide a 3% real return to the common peeps on a savings account. <
My savings account is with a major bank. The interest rate hasn’t budged. It’s still 0.01% (not a misprint). CD’s might pay double that. Big deal.
I’m not too upset about that as I don’t keep a whole lot of money there. But this is killing older folks who traditionally rely on bank accounts.
p
Interest rates should be set by the market, not unelected criminals.
And then they’re done. Soon they’ll have to start lowering again.
I am very familiar with all of that.
When Ike was large and in charge, as a kid in elementary school, our bank accounts provided real interest. [not that I earned enough to be able to buy more Necco Wafer rolls at the local pre-7-11 store...
Look at the difference between the a Fed rate and mortgage rates, savings account rates, credit card rates, auto loan rates, etc. and it's clear that the market does set most rates.
This is the issue. We’re squabbling over increases and timing when the fight is about who is setting rates.
The FOMC meets three more times this year. I suspect that rates will be increased but at a lower number of points than tomorrow's jump will be.
The Fed Reserve member/sycophant banks (BofA, Chase, Wells Fargo) haven’t moved much on rates but other banks/CU’s have come up to the 1.50%-1.65% range:
https://www.bankrate.com/banking/savings/rates/
(Still losing big time to inflation tho.)
I only do business with Fed Reserve “non-member” banks (state chartered banks)(or CU’s...they are all “non-fed-reserve”). Look for “SNM” in the “Chtr” column in the following list for non-member banks:
https://www.federalreserve.gov/releases/lbr/current/lrg_bnk_lst.pdf
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