Feds raise rate 1/4%, more to come this year

Discussion in 'Politics, Religion, Social Issues' started by PracticalMac, Mar 15, 2017.

  1. PracticalMac macrumors 68030

    PracticalMac

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    #1
    Feds raise rate 1/4%, more to come this year.
    (totally predicted and needed for better economy.)

    Twitter storm predicted to follow.
     
  2. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #2
    Waited for Obamafail to leave before raising the rates.
     
  3. Dmunjal macrumors 65816

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    #3
    Better economy? Where?

    http://www.reuters.com/article/us-usa-economy-atlantafed-idUSKBN16M2E4

    I think they should have rates years ago. But raising them now when the economy is actually doing worse is a political play, IMO.
     
  4. appleisking macrumors 6502a

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    #4
    They raised by the same amount during his term nice try.
     
  5. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #5
    During the first 100 days? Obviously trying to tilt the economy in a political play.
     
  6. Dmunjal macrumors 65816

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    #6
    They raised it twice in 8 years under Obama.
     
  7. appleisking macrumors 6502a

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    #7
    THen why not raise it by 2% far more economic damage in a political plot
     
  8. Dmunjal macrumors 65816

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    #8
    That's unprecedented even for the Fed. They still need to maintain their credibility and plausible deniability. However, they did remove the word "gradually" from their statement about raising rates in the future. You may be on to something.
     
  9. Dmunjal macrumors 65816

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    #9
    Correction.

    They raised it once during his presidency and once during the lame duck session when Trump had already won.

    You could make the argument that they raised them once under Obama and twice since Trump has been elected. In a span of three months. Very political.
     
  10. Zenithal macrumors 68040

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    #10
    I had no idea Obama stopped being president on Nov 9. Oh deary me.
     
  11. Dmunjal macrumors 65816

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    #11
    Look at it another way. Would the Fed have raised rates in a Clinton presidency with the GDP growing at less than 1%?
     
  12. Zenithal macrumors 68040

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    #12
    They did during Bill's first few years. Greenspan refused to do in the late 90s. The economy was going to take a tumble, and it did. Raised rates affect certain people and don't affect others. Whether rates are cut or increased, they'll benefit some and hurt some. It's a very two-sided issue.
     
  13. Dmunjal macrumors 65816

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    #13
    So we have two examples of the Fed not raising rates in a Democrat presidency to maintain the bubble while they raised rates in a Republican presidency to burst a bubble.
     
  14. NT1440 macrumors G4

    NT1440

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    #14
    Rates should have been raised years ago.

    To all the people screaming bloody murder about how this will damage the economy: What kind of economic system has the stocks at the highest in history, corporate profits over the last decade at record levels, but can only do so (supposedly) with money being loaned out to banks at basically 0% interest? Maybe it's time to admit that our economic system has been divorced from the well being of citizens and instead solely focused on financial shenanigans until someone is left holding the back as it collapses?
     
  15. Desertrat macrumors newbie

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    #15
    An increase in the Fed rate has always been a brake on the economy. It is worthwhile if the rate of consumer price inflation begins some sort of notable increase--but it still leads to a slow-down. Recall Volcker and 1980.

    While this increase is miniscule, it makes our rate higher than other countries' rates and affects the flow of money around the world. There is an existing currency war in progress, worldwide, as nations degrade their currencies in an effort to maintain exports.

    The present U.S. economy is pretty much in the toilet, with a whole lot of government lying going on--unemployment rate, consumer price inflation, etc. The low Fed rate has driven investments into the stock market, even though the fundamentals are lousy. P/E ratios only look good because of stock buy-backs. Far more insiders are selling than buying; ever wonder why?
     
  16. Dmunjal macrumors 65816

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    #16
    Absolutely. The record profits are BECAUSE of low interest rates. Most corporations are using debt to buy back stock to make EPS look better than it really is. Absolute revenue growth is not that great except for tech. GDP growth has been averaging less than 2% for the past 8 years yet the stock market is up over 300%. Something is wrong. Rates need to go up so we can return to a regular economy again.
     
  17. NT1440 macrumors G4

    NT1440

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    #17
    Yup, can't really add much to this.
     
  18. Dmunjal macrumors 65816

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    #18
    No one wants to admit this nor will the media talk about this. But this is why I believe Trump got elected. I doubt he can fix it. The establishment and the Fed are stronger than the presidency.
     
  19. Carnegie macrumors 6502

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    #19
    With it growing at less than 1% over a significant period of time? Likely it wouldn't have, as other conditions supportive of a rate hike (and which matter more to the Fed) would also likely not be met. But that's not the situation we're in. GDP over time has been above 1% and is expected to continue to be.

    The FOMC does look at GDP, yes. But short-term GDP numbers aren't controlling for the FOMC because: (1) As they've indicated, GDP numbers can be noisy and (2) maintaining certain GDP growth isn't the FOMC's primary concern when it comes to determining monetary policy (as it isn't part of the Fed's mandate).

    The FOMC is primarily concerned with full employment and price stability. Employment and inflation numbers of late have been generally supportive of tightening monetary policy, consistent with what the FOMC has set as long-term goals on those fronts.

    At its September meeting, 14 of 17 FOMC participants forecast that (at least) an additional rate hike would be appropriate before the end of the year (which would mean either in November or in December). Four of them actually forecast at least 2 rate hikes would be appropriate by the end of the year (meaning, at least a half point increase rather than a quarter point increase, though that could of course come as a single hike). That was before the election. They telegraphed that, absent meaningful changes in, e.g., prices or employment conditions, they were likely to raise rates another quarter point before the end of the year and that's what they did. It was predictable without knowing who would be elected President and expected when it happened.

    At that same September meeting (which I'm using because it was the last time before the election that FOMC participants made rate forecasts) 14 of 17 participants forecast that at least 2 more rate hikes would be appropriate in 2017. Six of them forecast that at least 4 would be appropriate, with 4 of those forecasting even more. Since then we've had employment data (to include wage data) and inflation data that has been supportive of rate hikes. The data for January and February, in particular, has been quite supportive of rate hikes. So, as should have been expected (and as was expected), we got another rate hike this month. FOMC participants' forecasts for the rest of 2017 have collectively gone up a bit, but not much. There are now 14 participants forecasting 3 rate hikes in 2017, but only 5 forecasting at least 4 and only 1 forecasting more than 4.

    The point being, most Fed watchers could have (and would have, I think) predicted this latest rate hike well before the election if they were told what the data for the last few months would be - and that would be without knowing who would become President.

    I'm a fiscal conservative and the furthest thing from a supporter of President Obama or Mrs. Clinton. If you had told me before the election what the data (most relevantly, the employment and inflation data) for the coming months would be, I would have been all but certain that a another rate hike would come in March - without regard for who the President would be. This hike was very much expected, as it should have been. It would have been shocking had the FOMC not raised the rate target in March given what they've been telling us about what they've been looking for and what their own forecasts have telegraphed. Had there been a regularly scheduled FOMC meeting in the middle of February (i.e. after January's employment data was available), I think it would have been fairly likely that the FOMC would have raised rates then.
     
  20. Dmunjal macrumors 65816

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    #20
    I agree that GDP growth is not the only criteria they use. Unemployment and inflation are also important measures. You forget that the original target when they began the easing cycle in 2009 was 6.5% unemployment and 2% inflation. We breached those many years ago. They could have easily raised rates back then but it wasn't politically acceptable to do that with a major election coming up. We have been below 5% unemployment for some time now and inflation is also about the same. There doesn't seem to be a new reason to raise rates appreciably now except for politics. This Fed doesn't like this president (and vice versa) and we'll see what happens over the next few months.

    GDP growth is actually decelerating and we'll probably print a number less than 1% for Q1. Worse than any quarter in years. Not the time to be raising rates using their normal criteria. But this isn't normal, is it?
     
  21. Eraserhead macrumors G4

    Eraserhead

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    #21
    Seen plenty of articles about stocks being overvalued.
     
  22. Dmunjal macrumors 65816

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    #22
    Sure. But none mention the Fed's role in it. And more specifically the mechanism of how low rates translate into higher prices.

    My other point was generally about the economy and the wealth disparity over the last 8 years. It hasn't been good for the middle class or the poor.
     
  23. Carnegie macrumors 6502

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    #23
    I didn't forget those earlier targets. They weren't relevant to the question I was answering, which was about whether there'd have been a hike now had Mrs. Clinton been elected.

    I'd have been happy to see more hikes sooner; I hope what I wrote didn't suggest otherwise. But based on what the FOMC has been saying (and forecasting) for a while, it's doing more or less what I would have expected it to do. What it's done - in fairly broad terms - is wait for the job market to tighten enough that we'd start to see wage growth (over a meaningful period). In their minds (in the aggregate, at least), they were able to wait longer (than, e.g., I and apparently you would have liked) because core inflation wasn't running too high. That allowed them to wait to see more improvement in employment conditions (to include, e.g., stabilization in the participation rate even with demographic headwinds). They weren't, in their minds, getting so much pressure from the other side of the dual mandate (i.e. price stability) such that they felt they needed to move before they were sure they should (i.e. based on the employment side of the dual mandate). I myself am not in favor of the dual mandate.

    What would you guess GDP growth for all of 2017 will be?
     
  24. Dmunjal macrumors 65816

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    #24
    Wage growth actually declined this past month. All signs point to a deceleration in the economy and the Fed raising rates will exasperate it. All by design, IMO.

    I predict a recession this year and negative GDP growth in the second half of the year.
     
  25. Carnegie macrumors 6502

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    #25
    Average hourly earnings were up 6 cents in February and 5 cents in January. More importantly (as such measures can also be a bit noisy), they were up nearly 3% YoY in February - an average of about 6 cents per month over the year.
     

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