Fed is about to bring the PAIN

BrunoMars420

HR Legend
Feb 14, 2016
12,406
13,766
113

“Federal Reserve officials are about to put numbers on the “pain” they’ve been warning of in recent weeks when they publish new projections for the economy, which could show a substantial rise in interest rates and unemployment ahead as the estimated price tag for reducing inflation.”
 
  • Like
Reactions: Hammer93

mnole03

HR Legend
Mar 20, 2005
23,254
59,882
113
GentleVariableApe-size_restricted.gif
 

Finance85

HR Legend
Oct 22, 2003
18,156
19,534
113
The biggest inflation items are food and housing, and both are essential. Raising interest rates doesn't help lower food costs, and actually hurts that effort. Raising interest rates also doesn't help lower energy prices. We have a fiscal policy problem. Monetary policy does little to solve that in this case.
 

onlyTheObvious

HR Heisman
Jan 3, 2021
6,819
7,957
113
do-it-ben-stiller.gif


Doubt it matters much but get it over with.

most people are financial idiots IMO. Over sending on entertainment, homes, and vehicles. The government needs to let them and the lenders fry. No bailouts.
 
Last edited:

BrunoMars420

HR Legend
Feb 14, 2016
12,406
13,766
113
After this increase, fed should turn their focus on to reducing their balance sheet. They are going to way overdue this.
Why do you say this? I agree with this sentiment on reducing the balance sheet but I also think we need to keep raising interest rates.
 

kwik44

HR Heisman
Gold Member
Mar 6, 2003
9,996
7,012
113
The biggest inflation items are food and housing, and both are essential. Raising interest rates doesn't help lower food costs, and actually hurts that effort. Raising interest rates also doesn't help lower energy prices. We have a fiscal policy problem. Monetary policy does little to solve that in this case.
Bingo. Brilliant admin keeps on doubling down. America is about to be more dependent than ever before, if not already.
 
  • Haha
Reactions: Tom Paris

luvmyhawks

HR Legend
Mar 22, 2005
20,576
17,362
113
Why do you say this? I agree with this sentiment on reducing the balance sheet but I also think we need to keep raising interest rates.

I am not saying they should completely back off raising rates, but a tad less aggressive moving forward. Go ahead and do the 75, maybe even a full 100 bps increase tomorrow then move to a less hawkish stance and look at 25 bps increases for rest of the year. Then turn all focus in increasing their qt. Instead of $90b a month, bump it to $150b. They have already done 2 monstrous increases and the effects of those are going to lag and take some more time To show if they are working. However, they have to start pulling some of that liquidity back in through qt. If they overdue it to fast, they will be cutting rates and gobbling up treasuries again before you know it, putting us in a potential world of hurt in the near future.

Let market forces dictate a real interest rate.
 
Last edited:

luvmyhawks

HR Legend
Mar 22, 2005
20,576
17,362
113
Yup. And they should tell the Secretary of the Treasury they won't be buying any new debt for awhile.

The federal reserve shouldn’t be funding any federal spending for the foreseeable future. I am still just completely bewildered at how the federal reserve handled this through last year. Did Powell sell some real estate at the end of 2021. It is mind blowing what they did to this real estate market.
 

seminole97

HR Legend
Jun 14, 2005
18,877
19,230
113
The federal reserve shouldn’t be funding any federal spending for the foreseeable future. I am still just completely bewildered at how the federal reserve handled this through last year. Did Powell sell some real estate at the end of 2021. It is mind blowing what they did to this real estate market.
How Keynesians view the Fed:

adcdd7-20141201-fantasia.jpg


How monetarists view the Fed:

ab1ecf9afd0761cd6a9b8b6a4a19667b.png


How goldbugs view the Fed:

9daf85a53bfe62295b68a322cb3802ad.jpg


Where we are now:

91a9f099025fbc956c244d9a075fab8e8dc73129.gif


What MMTers hope for:


f05_10.jpg
 
  • Haha
Reactions: luvmyhawks

bhawk24bob

HR Legend
Jul 8, 2001
17,773
5,687
113
The federal reserve shouldn’t be funding any federal spending for the foreseeable future. I am still just completely bewildered at how the federal reserve handled this through last year. Did Powell sell some real estate at the end of 2021. It is mind blowing what they did to this real estate market.

The economists they have at the branch levels and Board of Governors are all very smart, but the structure of the Fed lends it to being conservative and moving painfully slow. Their data isn't real time outside of liquidity reports that are daily, and they have to implement monetary policy in line with its mandate at a national level.
 

Sooner-Be-Dead

HR Heisman
Sep 2, 2003
9,588
2,824
113
We’re going to have to have some fear in asset prices to get a grip on inflation. Employment and spending are too strong to see a quick drop in reported inflation.

The Fed will overshoot on rates and balance sheet and we’ll be in a recession in a year or two.
 

BrunoMars420

HR Legend
Feb 14, 2016
12,406
13,766
113
They are projecting the u/e rate to go to 4.4-5% range in 2023. Also basically saying they plan on doubling the neutral rate when they were always saying a little above. More #pain into 2023!

Hold and keep building those reserves HORT.
Also the fed has been wrong for like 3 years now on estimations lol. Might want to think their predictions will be a .5% to 1.5% higher when it’s all said and done lol
 
  • Like
Reactions: luvmyhawks

luvmyhawks

HR Legend
Mar 22, 2005
20,576
17,362
113
Also the fed has been wrong for like 3 years now on estimations lol. Might want to think their predictions will be a .5% to 1.5% higher when it’s all said and done lol

I have zero confidence in this fed. They are about as incompetent as any group I can remember. This recession will fall squarely on their shoulders.
 
  • Like
Reactions: mphawk

bhawk24bob

HR Legend
Jul 8, 2001
17,773
5,687
113
You don’t get to talk out of both sides of your mouth, and I don’t see any realistic suggestions for how to reduce inflation other than through the Fed
 
  • Like
Reactions: Sooner-Be-Dead

luvmyhawks

HR Legend
Mar 22, 2005
20,576
17,362
113
You don’t get to talk out of both sides of your mouth, and I don’t see any realistic suggestions for how to reduce inflation other than through the Fed

We wouldn’t be in this situation if it weren’t for the fed.
 

bhawk24bob

HR Legend
Jul 8, 2001
17,773
5,687
113
We wouldn’t be in this situation if it weren’t for the fed.

That’s one side of the coin, the other is that we are in this situation because our politicians at the state and federal levels were tripping over themselves to print and hand out money to pretend that shutting down the economy due to an Act of God would have no impact on peoples lives. We were either going to pay for it in 2020 or afterwords, now we have the worst of both worlds of paying for it and having inflation
 

Finance85

HR Legend
Oct 22, 2003
18,156
19,534
113
You don’t get to talk out of both sides of your mouth, and I don’t see any realistic suggestions for how to reduce inflation other than through the Fed
The solutions are:
1) Stop making policies that hurt the energy sector
2) Stop additional government spending

The first can happen immediately, and will have a relatively quick impact.
The second will take significant time.

The Fed raising interest rates does nothing to help food and energy costs, and probably hurts both. People still need to eat and have transportation.
 
  • Like
Reactions: Hawk_82

BrunoMars420

HR Legend
Feb 14, 2016
12,406
13,766
113
While yea the government COVID response is part of the issue with flooding the market and consumers with money they didn’t need let’s not forget the supply chain issues due to Covid as well. We are still seeing issues due to that currently. Kind of a perfect storm of once in a lifetime global pandemic shutting everything down and a horrible government response.
 
  • Like
Reactions: srams21

Hawk_4shur

HR Legend
Jan 2, 2009
15,754
21,253
113
I am not going to say the Fed is wrong - way smarter than me. But what does increasing the interest rate do to curb inflation?

It seems to me that this inflation is being caused primarily by demand exceeding supply. Supply is short because of a labor shortage and problems in the supply chain.

Higher rates means it's more expensive for banks to borrow money. Banks are already struggling with their investment portfolios and deposit rates are being repriced as we speak. All this means loans to businesses and consumers will become more expensive.

That, in turn, will make it harder for businesses to expand capacity to meet demand. Harder for them to invest in infrastructure to become more efficient - also to meet demand.

Yes, housing prices are coming down, but they are actually more expensive to buy with higher rates.

Also, interest rates may encourage savings instead of spending - that can cool inflation I suppose. But raising rates certainly creates headwind for the stock market, so maybe less incentive to save.

So, again, what does increasing the interest rate do to slow inflation?
 
  • Like
Reactions: Ree4

BrunoMars420

HR Legend
Feb 14, 2016
12,406
13,766
113
I am not going to say the Fed is wrong - way smarter than me. But what does increasing the interest rate do to curb inflation?

It seems to me that this inflation is being caused primarily by demand exceeding supply. Supply is short because of a labor shortage and problems in the supply chain.

Higher rates means it's more expensive for banks to borrow money. Banks are already struggling with their investment portfolios and deposit rates are being repriced as we speak. All this means loans to businesses and consumers will become more expensive.

That, in turn, will make it harder for businesses to expand capacity to meet demand. Harder for them to invest in infrastructure to become more efficient - also to meet demand.

Yes, housing prices are coming down, but they are actually more expensive to buy with higher rates.

Also, interest rates may encourage savings instead of spending - that can cool inflation I suppose. But raising rates certainly creates headwind for the stock market, so maybe less incentive to save.

So, again, what does increasing the interest rate do to slow inflation?
Higher rates slows down an economy from over heating.
 
  • Like
Reactions: HawkRCID

HawkRCID

HR All-American
Nov 7, 2018
4,865
9,379
113
This is completely anecdotal but I saw two different companies in unrelated industries post about new lower pricing in the past five days.

We may be beginning to see the tide turn, I don’t recall seeing things like that for quite some time.
 

luvmyhawks

HR Legend
Mar 22, 2005
20,576
17,362
113
That’s one side of the coin, the other is that we are in this situation because our politicians at the state and federal levels were tripping over themselves to print and hand out money to pretend that shutting down the economy due to an Act of God would have no impact on peoples lives. We were either going to pay for it in 2020 or afterwords, now we have the worst of both worlds of paying for it and having inflation
No, we wouldn't be in this situation if it weren't for excessive government spending, and increasing the money supply much faster than GDP.

I am not disagreeing with either of you on this. However, the open spigot of funding provided by the federal reserve for this spending and the artificial suppression of rates for far too long are the main catalyst. Look no further than the real estate market. Imagine if the treasury actually had to auction off their treasuries and let the open market determine the rates. Same with mortgage backed securities. You think we have a bloated real estate market if rates are even at 4% last year? I sure don’t.
 
Feb 9, 2013
19,787
55,166
113
Why is fighting inflation the main goal above everything else? I simply don’t understand why taking steps to put our country into a recession, with all the resulting job loss and negative spinoff effects, is better than letting inflation work itself out.
 
  • Like
Reactions: bhawk24bob

luvmyhawks

HR Legend
Mar 22, 2005
20,576
17,362
113
Why is fighting inflation the main goal above everything else? I simply don’t understand why taking steps to put our country into a recession, with all the resulting job loss and negative spinoff effects, is better than letting inflation work itself out.

You know, this is a good question. The really short answer is stagflation.
 
  • Like
Reactions: srams21

Latest posts