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Fed will still hike a quarter point next round. They won't stop until they push us into a recession.
Headline CPI down to 5.0% today. Ritholz thinks further rate cuts might overcook the goose, tipping us into recession when the Fed may already have done enough tovtame inflation.
Because of the lag between interest rate changes and inflation (~1-2 years), it's roughly impossible to tell when to take the foot off the brake.
https://ritholtz.com/2023/04/cpi-5-0/
Fed will still hike a quarter point next round. They won't stop until they push us into a recession.
The steady employment numbers are being driven by growth in lower income jobs in services and hospitality while "good jobs" are being laid off by the tens of thousands. Good luck to 2023 college grads if they aren't in STEM degrees.
Fed says our BigFinance Capitalist friends in banking will cause a recession this year.
Tons of pundits predicting BAD recession.
Thanks, Capitalism, you ing suck for non-Capitalists
Boukaki, why don't you just move to Cuba? You would love it there.
https://www.theonion.com/federal-res...source=twitterFaced with stubbornly high levels of employment and intent on engineering the hardest landing possible for ordinary Americans, Federal Reserve Chairman Jerome Powell called Thursday for more poverty. “It’s essential that we use every lever at our disposal to protect the status quo, and this includes raising the poverty rate,” said Powell, asserting that he would not hesitate to increase poverty to whatever level was necessary to relegate average citizens to lives of financial des ution and misery. “We must do everything in our power to ensure that people cannot afford to buy a home or a car. Should we fail to act, we run the very real risk that Americans at the bottom of the economic ladder will start to get ahead at the expense of those at the top. This is an outcome we are keen to avoid.” At press time, Powell issued what he described as the bleakest economic assessment of his tenure at the Fed, indicating that job growth was likely to continue through much of 2023.
He's predicting the same thing you are.
Martin Wolf thinks the Fed is stimulating inflationary expectations, a sort of macro self-fulfilling prophecy.
Blair Fix thinks rates hikes correlate with higher inflation.
https://economicsfromthetopdown.com/...onetary-faith/
https://wolfstreet.com/2023/05/11/th...his-inflation/With core CPI at 5.52% in April, the “real” Effective Federal Funds Rate (EFFR minus core CPI) is still a negative 0.44%. And negative real policy rates are still a form of interest rate repression, and are still stimulative of the economy and of inflation.
And so core CPI got stuck at 5.5% to 5.7%, and isn’t making any efforts to be heading toward 2% or whatever, and instead, everyone has gotten used to this inflation and accepts it, and deals with it, and builds it into economic decisions, which is nurturing this inflation right along.
In other words, with its current policy rates, the Fed is still just removing accommodation, rather than turning the screws on inflation.
But the crybabies on Wall Street are out there in force screaming about those unfair interest rates and clamoring for immediate rate cuts, like in June, to remove this incredible injustice of 5% short-term rates and even lower long-term Treasury yields (the 10-year Treasury yield is at 3.43%, LOL), when core CPI is 5.5%.
For those crybabies on Wall Street, the best money is free money. They want their 0% back, and they want their QE back. But now we have this inflation that’s not going away.
When we look back 60 years, we see what an extraordinary period this QE and interest rate repression since 2008 has been. During almost the entire 14 years — except for a few months in 2019 — the Fed’s policy rate was far below the rate of core CPI. And to this day, it remains below core CPI. But that’s an upside-down version of what was the rule before 2008.
I don't see the Fed stopping the quarter point hikes any time soon, especially after that last jobs report.
Yeah they want a recession
pretty astonishing how resilient the economy has been to the rate hikes tbh
what happened to the shadow unemployment?
I think we have a lot of years of slow growth to make up for, demand-wise.
Boomers removing themselves from the Labor pool is making life awesome for us Gen Xers. Demand for our skilled/educated labor is SKY ING HIGH, meaning we are going gangbusters in the labor market.
At the same time, capital is going to start getting expensive, as those boomers cash out, which means my retirement savings are going to do REALLY well.
People not having kids means they spend it on themselves. "high octane growth"
typical historical lag time for measurable effects on rate hikes is 6 to 18 months, but there's little that normal about where we are right now. it's not a given that the Fed knows what it's doing or that a recession will result.
inflation started its observable decline trend around october or so, which tracks with a ~6 month reaction time. meanwhile its been over 12 months since the rate hikes began. i agree that it might end up being the case that the most recent hike(s) will be found to have not been necessary, but given how modest the increases were im not sure it will be that massive an overcorrection. we shall see.
there had been some optimism that the may hikes would be the last one and they would start bringing them down in the fall/winter, but with the latest reports, might not be the case
We need to keep hiking the rates up and up and up until we have negative inflation to return the value of the dollar to 2019. Basically un-do covid and work from there and keep the sustainable ~1.5-1.9% inflation rate that we had from there going.
Up and up and up works for me because I don't trust any investments other than fixed income CD's.
yep.
the real FFR (FFR- CPI) still being negative would seem to be accomodative from a monetary standpoint, i.e., stimulative. that would seem to be in line with more rate hikes.
Barring another financial crisis, you won't see inflation below 2% again this decade. The boomer era is coming to an end and it only accelerates with every passing year.
What we need is a large scale financial crisis in 2023/24 which would do wonders on a lot of things, hopefully cause negative inflation and skyrocketing unemployment as well as tank house prices to finally at long last give responsible cash-buyers (like me who have been waiting forever to pounce) a chance, but most importantly of all cause a massive red wave in November 2024 and get rid of Biden and all of the Senate Dems in purple and red states once and for all.
Bring on the great recession of 2023-24. Bring it hard.
If we get another GFC it will be the most widely predicted financial crisis/recession in history. So far the bears (which is just about everybody in Biden's America) have been wrong and they just keep saying next qtr it will happen. I think we're in for a prolonged period (decade plus) of low growth and persistant inflation and higher interest rates. If the Fed does cause a massive financial crisis it really will be time to end the Fed at least in it's current form. They totally botched sticking with the transitory inflation for too long, if they break the financial system trying to save face then it's time for reform. Step one imo would be a minimum interest rate, maybe 3-4%, any lower requires congressional approval every quarter.
i think the concept of a minimum interest rate is fair, but man, im reluctant to trust congress to get anything like that done (quarterly approval, etc). requires too much cooperation and there will be asshats holding it hostage as a bargaining chip for their pet project de jure
could still have an independent fed but with concrete guidelines/requirements to justify rate decreases
The goal is to have the lowest interest rates possible without stimulating inflation. Fed had loaded the gun by keeping interest rates too low for too long and covid stimulation flooding the market with excess cash was the trigger. Boom.
sure. not sure how that contradicts my post
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