: Fed raises interest rates by .75 points to fight inflation

cigaretteman

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In a move watch closely by the White House, the Federal Reserve raised interest rates again Wednesday by .75 percentage points in its latest fight against inflation, despite growing concerns that the central bank is slowing the economy so aggressively that households and businesses will soon feel the pain.
The Post’s Rachel Siegel reports that the rate increase, announced at the end of the Fed’s two-day policy meeting, was the fifth of the year and the third consecutive three-quarter point hike.
President Biden has supported the Fed’s efforts to calm inflation, and he recently said he doesn’t think raising interest rates will cause a recession.
“We hope we can have what they [call] a soft landing — a transition to a place where we don’t lose the gains that I ran to make in the first place for middle-class folks,” Biden told CBS News Scott Pelley for a segment that aired Sunday on “60 Minutes.”
The White House did not immediately comment on Wednesday’s move by the Fed, which was expected.
Per Rachel:
So far, the job market and consumer spending — two crucial economic engines — have stayed resilient through the Fed’s sharp rate hikes, and Americans may even be feeling better about inflation.
But interest rate increases operate with a lag, and before too long, the full weight of what the bank has already done may become clear. The markets have grown increasingly anxious about a recession, and stocks have tumbled in recent weeks on investor anxiety that the Fed won’t ease up on its policies anytime soon.
You can read more from Rachel and other Post reporters on a live update file devoted to the Fed action here.
 

seminole97

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Jun 14, 2005
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Dems are going to find themselves redefining the word depression here soon enough.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 0.3 percent on September 20, down from 0.5 percent on September 15, down from 1.4 percent on September 7, and down from 2.6 percent on September 1.
After this morning's housing starts report from the US Census Bureau, the nowcast of third-quarter residential investment growth decreased from -20.8 percent to -24.5 percent.
 
Feb 9, 2013
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Listened to some of Powell’s press conference and the parts I heard it seemed like they are hyperfocused on reducing inflation by trying to influence supply and demand.

I’m no economic genius, but won’t supply and demand - if left alone - always find its natural state? High prices should encourage market entrants, which increases supply and reduces prices. Seems like they are trying to create a recession in order to reduce demand. Kind of a kill the economy to save the economy thing.

I’m sure I have that completely backward but it seems very interventionist.
 

Sooner-Be-Dead

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Sep 2, 2003
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The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 0.3 percent on September 20, down from 0.5 percent on September 15, down from 1.4 percent on September 7, and down from 2.6 percent on September 1.
After this morning's housing starts report from the US Census Bureau, the nowcast of third-quarter residential investment growth decreased from -20.8 percent to -24.5 percent.
And yet you argue for dramatically tightening monetary conditions. Almost wonder what your motives are.
 
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Sooner-Be-Dead

HR Heisman
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Listened to some of Powell’s press conference and the parts I heard it seemed like they are hyperfocused on reducing inflation by trying to influence supply and demand.

I’m no economic genius, but won’t supply and demand - if left alone - always find its natural state? High prices should encourage market entrants, which increases supply and reduces prices. Seems like they are trying to create a recession in order to reduce demand. Kind of a kill the economy to save the economy thing.

I’m sure I have that completely backward but it seems very interventionist.
Yes, supply and demand would balance out on its own but it would take a few years. People won’t wait for that so the Fed will overshoot and we’ll have a recession.
 

seminole97

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And yet you argue for dramatically tightening monetary conditions. Almost wonder what your motives are.
My motive is to see the Potemkin economy sundered before it wastes more resources than it would if prolonged.

Unrealistic interest rates create unsustainable patterns of production and consumption.
If printing money created wealth we wouldn’t punish counterfeiters.
Giving a counterfeiter a bank and telling him to loan his ‘production’ instead of simply spend it doesn’t alter that fundamental truth, it just allows the counterfeiter to launder his money with actual earnings paid back to him.
It’s a system rotten at its core and irredeemable.
 

Sooner-Be-Dead

HR Heisman
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My motive is to see the Potemkin economy sundered before it wastes more resources than it would if prolonged.

Unrealistic interest rates create unsustainable patterns of production and consumption.
If printing money created wealth we wouldn’t punish counterfeiters.
Giving a counterfeiter a bank and telling him to loan his ‘production’ instead of simply spend it doesn’t alter that fundamental truth, it just allows the counterfeiter to launder his money with actual earnings paid back to him.
It’s a system rotten at its core and irredeemable.
Well that would be an awesome Pyrrhic victory.
 

seminole97

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Well that would be an awesome Pyrrhic victory.
Getting rid of loss creating firms is an essential element of a market economy. A Pyrrhic victory would be policies that enabled a loss generating firm to sustain itself, and thereby extend losses indefinitely instead of end them and allow resources to go to their higher use.

At the conclusion of World War I, U.S. officials found themselves in a bleak position. The federal debt had exploded because of wartime expenditures, and annual consumer price inflation rates had jumped well above 20 percent by the end of the war.

To restore fiscal and price sanity, the authorities implemented what today strikes us as incredibly “merciless” policies. From FY 1919 to 1920, federal spending was slashed from $18.5 billion to $6.4 billion—a 65 percent reduction in one year. The budget was pushed down the next two years as well, to $3.3 billion in FY 1922.

On the monetary side, the New York Fed raised its discount rate to a record high 7 percent by June 1920. Now the reader might think that this nominal rate was actually “looser” than the 1.5 percent discount rate charged in 1931 because of the changes in inflation rates. But on the contrary, the price deflation of the 1920–1921 depression was more severe. From its peak in June 1920, the Consumer Price Index fell 15.8 percent over the next 12 months. In contrast, year-over-year price deflation never even reached 11 percent at any point during the Great Depression. Whether we look at nominal interest rates or “real” (inflation-adjusted) interest rates, the Fed was very “tight” during the 1920–1921 depression and very “loose” during the onset of the Great Depression.

Now some modern economists will point out that our story leaves out an important element. Even though the Fed slashed its discount rate to record lows during the onset of the Great Depression, the total stock of money held by the public collapsed by roughly a third from 1929 to 1933. This is why Milton Friedman blamed the Fed for not doing enough to avert the Great Depression. By flooding the banking system with newly created reserves (part of the “monetary base”), the Fed could have offset the massive cash withdrawals of the panicked public and kept the overall money stock constant.

But even this nuanced argument fails to demonstrate why the 1929–1933 downturn should have been more severe than the 1920–1921 depression. The collapse of the monetary base (directly controlled by the Fed) during 1920–1921 was the largest in U.S. history, and it dwarfed the fall during the early Hoover years. So we hit the same problem: The standard monetarist explanation for the Great Depression applies all the more so to the 1920–1921 depression.

If the Keynesians are right about the Great Depression, then the depression of 1920–1921 should have been far worse. The same holds for the monetarists; things should have been awful in the 1920s if their theory of the 1930s is correct.

To be sure, the 1920–1921 depression was painful. The unemployment rate peaked at 11.7 percent in 1921. But it had dropped to 6.7 percent by the following year and was down to 2.4 percent by 1923. After the depression, the United States proceeded to enjoy the “Roaring Twenties,” arguably the most prosperous decade in the country’s history. Some of this prosperity was illusory—itself the result of subsequent Fed inflation—but nonetheless the 1920–1921 depression “purged the rottenness out of the system” and provided a solid framework for sustainable growth.
 
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Feb 9, 2013
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Yes, supply and demand would balance out on its own but it would take a few years. People won’t wait for that so the Fed will overshoot and we’ll have a recession.
So (in the short term) instead of people being able to reduce spending on their own we’re going to put them out of work in the hopes that things willl eventually cost less. Inflation is rough, sure. Rougher than mass layoffs?
 
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joelbc1

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you can’t always get what you want!
The “Inflation Reduction Act” was a success!
Eventually it will be, Mark. You are smart enough I think to understand this has been coming at us for over a decade and it ain’t going away tomorrow. It all will take care of itself in time. At least we aren’t selling farmsteads, yet.
(We should have been reworking the tax code and raising tax rates the past 4-5 years instead of gifting the rich. Everyone knew there was no such thing as “free money”...we just chose to ignore the reality of the situation.)
 

Jimmy McGill

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Earth
How to say you are old without saying it. ;) Do you call in your trades to your full service broker?


Not old, just have been left behind. I''ll put on my disabled helmet. Actually, I really want to change banks. Bank of the West can suck my ballz
 

pepsicock

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5 miles from Willams Brice stadium
Donald Trump Thumbs Up GIF by Justin Gammon
 
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Eventually it will be, Mark. You are smart enough I think to understand this has been coming at us for over a decade and it ain’t going away tomorrow. It all will take care of itself in time. At least we aren’t selling farmsteads, yet.
(We should have been reworking the tax code and raising tax rates the past 4-5 years instead of gifting the rich. Everyone knew there was no such thing as “free money”...we just chose to ignore the reality of the situation.)
There was a snow balls chance in Hades the inflation reduction act was going to actually reduce inflation, any chance of that was immediately wiped out with this bullshit student loan cancelation.
 
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MikeyHawk

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Eventually it will be, Mark. You are smart enough I think to understand this has been coming at us for over a decade and it ain’t going away tomorrow. It all will take care of itself in time. At least we aren’t selling farmsteads, yet.
(We should have been reworking the tax code and raising tax rates the past 4-5 years instead of gifting the rich. Everyone knew there was no such thing as “free money”...we just chose to ignore the reality of the situation.)
Just so dumb, every time, just so dumb. Raise taxes!
 

joelbc1

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you can’t always get what you want!
There was a snow balls chance in Hades the inflation reduction act was going to actually reduce inflation, any chance of that was immediately wiped out with this bullshit student loan cancelation.
Much like the tax cut of Trump encouraged inflation. Sooner or later you have to pay for this shit....and quit putting it on the company credit card. Spending money on infrastructure (roads, sewers, water supplies) is much better use of money than letting the rich/wealthy not pay taxes.
 
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