What is up with rate hikes?

Federal Reserve Chairman Jerome Powell on Friday defended the central bank’s plans to gradually hike interest rates, citing the strength of the U.S. economy and new uncertainty about how it operates. Powell said that the Fed would continue to raise interest rates as the economy expands and unemployment lingers at near-record lows, resisting calls to maintain easy money policies while inflation remains stable. President Trump has ripped the Fed and Powell for raising interest rates, which he says will needlessly stifle economic growth and hurt the U.S. in trade negotiations. But Powell has brushed off that criticism and said the White House would have no impact on monetary policy.

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Higher rates, higher inflation, higher gas prices, more tariffs, skyrocketing home prices, little wage growth = fill in the blank.

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1 minute ago, Stephen said:

Higher rates, higher inflation, higher gas prices, more tariffs, skyrocketing home prices, little wage growth = fill in the blank.

Keep these hikes coming! Let’s get this cycle over with.

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1 minute ago, Stephen said:

Higher rates, higher inflation, higher gas prices, more tariffs, skyrocketing home prices, little wage growth = fill in the blank.

inflation! Its all about the banks who aren't passing along these higher rates to individuals in the way of less risky investments. Screws the working class.

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10 minutes ago, Joanna said:

Federal Reserve Chairman Jerome Powell on Friday defended the central bank’s plans to gradually hike interest rates, citing the strength of the U.S. economy and new uncertainty about how it operates. Powell said that the Fed would continue to raise interest rates as the economy expands and unemployment lingers at near-record lows, resisting calls to maintain easy money policies while inflation remains stable. President Trump has ripped the Fed and Powell for raising interest rates, which he says will needlessly stifle economic growth and hurt the U.S. in trade negotiations. But Powell has brushed off that criticism and said the White House would have no impact on monetary policy.

Apparently Jerome Powell missed the Trump loyalty oath gatherings

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Just now, Sefko Trafikant said:

Apparently Jerome Powell missed the Trump loyalty oath gatherings

next one to depart Big Brother house

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The Bureau of Economic Analysis released their report on Personal Income and Outlays: June 2018 which included its Comprehensive Update: 1929 Through May 2018 this morning. It shows that inflation measured by the top-line percent change in price index for personal consumption expenditures from the same month in the prior year has been within 0.2% of the Fed's 2% target in every month reported back to November. The preliminary number for June was 2.2%.

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16 minutes ago, Joanna said:

Federal Reserve Chairman Jerome Powell on Friday defended the central bank’s plans to gradually hike interest rates, citing the strength of the U.S. economy and new uncertainty about how it operates. Powell said that the Fed would continue to raise interest rates as the economy expands and unemployment lingers at near-record lows, resisting calls to maintain easy money policies while inflation remains stable. President Trump has ripped the Fed and Powell for raising interest rates, which he says will needlessly stifle economic growth and hurt the U.S. in trade negotiations. But Powell has brushed off that criticism and said the White House would have no impact on monetary policy.

The last time the feds raised rates they put millions of mortgages under water and we had a recession. Trump is right.

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Raising rates will only cause the government to spend more to finance the debt. It will hurt borrowers but be an opportunity for bond and bond fund buyers later this year. Should be good bond fund buying chances about December and I'm holding off until then to add to my positions.

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1 hour ago, Joanna said:

Federal Reserve Chairman Jerome Powell on Friday defended the central bank’s plans to gradually hike interest rates, citing the strength of the U.S. economy and new uncertainty about how it operates. Powell said that the Fed would continue to raise interest rates as the economy expands and unemployment lingers at near-record lows, resisting calls to maintain easy money policies while inflation remains stable. President Trump has ripped the Fed and Powell for raising interest rates, which he says will needlessly stifle economic growth and hurt the U.S. in trade negotiations. But Powell has brushed off that criticism and said the White House would have no impact on monetary policy.

This is a feel good scenario for the market. GDP seems to be picking up and the FED appears to be giving a clear message of were out in front of this thing. Market should hit 27K or higher before a correction probably around the next presidential election. Should be interesting.

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2 hours ago, JohnAtronis said:

The last time the feds raised rates they put millions of mortgages under water and we had a recession. Trump is right.

Raising rates does not automatically put mortgages underwater, only if you were naive enough to get an adjustable rate mortgage

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(edited)

12 hours ago, JohnAtronis said:

The last time the feds raised rates they put millions of mortgages under water and we had a recession. Trump is right.

Actually, Powell is right on this one.  And technically, those mortgages went underwater due to the manipulation that went into the housing market thanks primarily to Bush's American Dream Downpayment Act of 2003 and Clinton's National Home Ownership strategy that begin in 1995.  Remembering that year, try to see if you an find the bubble in the chart below; after you do, notice when the bubble began:

"We can put light where there's darkness, and hope where there's despondency in this country. And part of it is working together as a nation to encourage folks to own their own home."

- President George W. Bush, Oct. 15, 2002

If Powell raises rates, that causes the dollar to appreciate which decimates US jobs by limiting exports.  If Powell keeps rates low, that deflates the dollar, which decimates US wages.  There is only one hope for the American worker: Powell must raise rates, and Trump must raise tariffs.  They must work together.  Only then will liberty and justice rule.  

 

20150610_hjome_0.jpg

Edited by Epic
forgot to attach my pic! ooops!
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(edited)

2 hours ago, Refman said:

Raising rates does not automatically put mortgages underwater, only if you were naive enough to get an adjustable rate mortgage

And if you purchased property that is actually out of your league.  Not completely the borrower's fault though.  Low rates and a complicit real estate industry have re-created the same housing bubble, funded in LARGE part again by derivatives, that we had in 2007/8.  The Fed's interest rate increases are necessary and certainly are not done to hurt home owners, although many may find themselves in deep kacka once again.

Perhaps someone on here with deeper knowledge about Fed interest rates can tell us more, but it is my understanding that under zero and near zero interest rates the Fed operates with most monies loaned out with the intention of stimulating loans and thereby the economy, whereas when rates are increased monies flow back into the reserve.  Again, as I understand it, if the downturn/crash that we all seem to agree is coming happens, the Fed will need huge reserves to prop up necessary parts of the economy.  You may notice that I said "necessary" parts of the economy.  The mistakes that were made in 2008 included bailing out failed institutions such as banks and brokerages, which should have been allowed to fail, and thereby clear off bad debt.  Instead, the same people who created these massive bubbles were in effect given liferafts and new yachts, while the citizens were once again left holding the bag.

 

Edited by Dan Warnick
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(edited)

7 minutes ago, Epic said:

Actually, Powell is right on this one.  And technically, those mortgages went underwater due to the manipulation that went into the housing market thanks primarily to Bush's American Dream Downpayment Act of 2003 and Clinton's National Home Ownership strategy that begin in 1995.    

"We can put light where there's darkness, and hope where there's despondency in this country. And part of it is working together as a nation to encourage folks to own their own home."

- President George W. Bush, Oct. 15, 2002

If Powell raises rates, that causes the dollar to appreciate which decimates US jobs by limiting exports.  If Powell keeps rates low, that deflates the dollar, which decimates US wages.  There is only one hope for the American worker: Powell must raise rates, and Trump must raise tariffs.  They must work together.  Only then will liberty and justice rule.  

I agree and I think Trump is playing another one of his games of misdirection with the Fed issue.  I sense that he is working with the Fed and understands that a financial correction, painful as it may be, needs to happen.  And the increase in rates is actually essential to keep the correction somewhat manageable. 

Edited by Dan Warnick
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