#federal reserve interest rates

[trendyfeed]

Fed meeting updates: Watch Chair Jerome Powell explain the Fed’s decision for a big rate cut,

[mohit-mathur]

Gold Prices Set to Drop Starting August 1: Reasons and opportunity

Gold, the glittering yellow metal, has always been a symbol of wealth and a preferred investment for Indians. Traditionally, gold prices in India have been influenced by various global and domestic factors, including international market trends, currency fluctuations, and local demand and supply dynamics. As of August 1, gold prices are set to see a significant drop, creating both challenges and…

[trader-sg112]

Oil Prices Inch Up Despite Mixed Signals

Oil prices edged slightly higher on Friday. Contracts for Brent crude oil expiring in August climbed 0.4%, reaching $86.73 per barrel. Similarly, West Texas Intermediate (WTI) crude futures, a key benchmark for North American oil, rose 0.4% to $82.09 per barrel.

This modest increase comes amidst conflicting forces in the oil market. While concerns about potential supply disruptions from the Middle East and ongoing geopolitical tensions provided some upward pressure, a strong U.S. dollar acted as a counterweight. A stronger dollar can make oil, priced in dollars, less attractive to buyers using other currencies.

The focus for investors has now shifted to upcoming U.S. inflation data, which could influence future decisions by the Federal Reserve on interest rates. Higher interest rates can strengthen the dollar and potentially dampen demand for oil.

[effectivethings]

Strategic U.S. Bond ETF Investment: Timing and Analysis

Table of contentsUnderstanding Bond Price Movements in Response to Interest Rate ChangesWhy do I invest in US bonds?1. Anticipating Interest Rate Trends: The Peak of Federal Reserve Hikes and Their Impact on Bonds2. Identifying Market Momentum: The Role of Moving Averages in My Bond Investment Strategy3. Independent Strategy: Navigating the Underappreciated Bond MarketRisks of Bond InvestmentHow…

[bobcronkphotography]

Fortress of Finance

The Federal Reserve Bank of San Francisco, California

Bob Cronk

[jeromepowell]

-50 beeps??? I dont know what to say...

How about “thank you”?

[mostlysignssomeportents]

Why the Fed wants to crush workers

The US Federal Reserve has two imperatives: keeping employment high and inflation low. But when these come into conflict — when unemployment falls to near-zero — the Fed forgets all about full employment and cranks up interest rates to “cool the economy” (that is, “to destroy jobs and increase unemployment”).

An economy “cools down” when workers have less money, which means that the prices offered for goods and services go down, as fewer workers have less money to spend. As with every macroeconomic policy, raising interest rates has “distributional effects,” which is economist-speak for “winners and losers.”

Predicting who wins and who loses when interest rates go up requires that we understand the economic relations between different kinds of rich people, as well as relations between rich people and working people. Writing today for The American Prospect’s superb Great Inflation Myths series, Gerald Epstein and Aaron Medlin break it down:

https://prospect.org/economy/2023-01-19-inflation-federal-reserve-protects-one-percent/

Recall that the Fed has two priorities: full employment and low interest rates. But when it weighs these priorities, it does so through “finance colored” glasses: as an institution, the Fed requires help from banks to carry out its policies, while Fed employees rely on those banks for cushy, high-paid jobs when they rotate out of public service.

Inflation is bad for banks, whose fortunes rise and fall based on the value of the interest payments they collect from debtors. When the value of the dollar declines, lenders lose and borrowers win. Think of it this way: say you borrow $10,000 to buy a car, at a moment when $10k is two months’ wages for the average US worker. Then inflation hits: prices go up, workers demand higher pay to keep pace, and a couple years later, $10k is one month’s wages.

If your wages kept pace with inflation, you’re now getting twice as many dollars as you were when you took out the loan. Don’t get too excited: these dollars buy the same quantity of goods as your pre-inflation salary. However, the share of your income that’s eaten by that monthly car-loan payment has been cut in half. You just got a real-terms 50% discount on your car loan!

Inflation is great news for borrowers, bad news for lenders, and any given financial institution is more likely to be a lender than a borrower. The finance sector is the creditor sector, and the Fed is institutionally and personally loyal to the finance sector. When creditors and debtors have opposing interests, the Fed helps creditors win.

The US is a debtor nation. Not the national debt — federal debt and deficits are just scorekeeping. The US government spends money into existence and taxes it out of existence, every single day. If the USG has a deficit, that means it spent more than than it taxed, which is another way of saying that it left more dollars in the economy this year than it took out of it. If the US runs a “balanced budget,” then every dollar that was created this year was matched by another dollar that was annihilated. If the US runs a “surplus,” then there are fewer dollars left for us to use than there were at the start of the year.

The US debt that matters isn’t the federal debt, it’s the private sector’s debt. Your debt and mine. We are a debtor nation. Half of Americans have less than $400 in the bank.

https://www.fool.com/the-ascent/personal-finance/articles/49-of-americans-couldnt-cover-a-400-emergency-expense-today-up-from-32-in-november/

Most Americans have little to no retirement savings. Decades of wage stagnation has left Americans with less buying power, and the economy has been running on consumer debt for a generation. Meanwhile, working Americans have been burdened with forms of inflation the Fed doesn’t give a shit about, like skyrocketing costs for housing and higher education.

When politicians jawbone about “inflation,” they’re talking about the inflation that matters to creditors. Debtors — the bottom 90% — have been burdened with three decades’ worth of steadily mounting inflation that no one talks about. Yesterday, the Prospect ran Nancy Folbre’s outstanding piece on “care inflation” — the skyrocketing costs of day-care, nursing homes, eldercare, etc:

https://prospect.org/economy/2023-01-18-inflation-unfair-costs-of-care/

As Folbre wrote, these costs are doubly burdensome, because they fall on family members (almost entirely women), who have to sacrifice their own earning potential to care for children, or aging people, or disabled family members. The cost of care has increased every year since 1997:

https://pluralistic.net/2023/01/18/wages-for-housework/#low-wage-workers-vs-poor-consumers

So while politicians and economists talk about rescuing “savers” from having their nest-eggs whittled away by inflation, these savers represent a minuscule and dwindling proportion of the public. The real beneficiaries of interest rate hikes isn’t savers, it’s lenders.

Full employment is bad for the wealthy. When everyone has a job, wages go up, because bosses can’t threaten workers with “exile to the reserve army of the unemployed.” If workers are afraid of ending up jobless and homeless, then executives seeking to increase their own firms’ profits can shift money from workers to shareholders without their workers quitting (and if the workers do quit, there are plenty more desperate for their jobs).

What’s more, those same executives own huge portfolios of “financialized” assets — that is, they own claims on the interest payments that borrowers in the economy pay to creditors.

The purpose of raising interest rates is to “cool the economy,” a euphemism for increasing unemployment and reducing wages. Fighting inflation helps creditors and hurts debtors. The same people who benefit from increased unemployment also benefit from low inflation.

Thus: “the current Fed policy of rapidly raising interest rates to fight inflation by throwing people out of work serves as a wealth protection device for the top one percent.”

Now, it’s also true that high interest rates tend to tank the stock market, and rich people also own a lot of stock. This is where it’s important to draw distinctions within the capital class: the merely rich do things for a living (and thus care about companies’ productive capacity), while the super-rich own things for a living, and care about debt service.

Epstein and Medlin are economists at UMass Amherst, and they built a model that looks at the distributional outcomes (that is, the winners and losers) from interest rate hikes, using data from 40 years’ worth of Fed rate hikes:

https://peri.umass.edu/images/Medlin_Epstein_PERI_inflation_conf_WP.pdf

They concluded that “The net impact of the Fed’s restrictive monetary policy on the wealth of the top one percent depends on the timing and balance of [lower inflation and higher interest]. It turns out that in recent decades the outcome has, on balance, worked out quite well for the wealthy.”

How well? “Without intervention by the Fed, a 6 percent acceleration of inflation would erode their wealth by around 30 percent in real terms after three years…when the Fed intervenes with an aggressive tightening, the 1%’s wealth only declines about 16 percent after three years. That is a 14 percent net gain in real terms.”

This is why you see a split between the one-percenters and the ten-percenters in whether the Fed should continue to jack interest rates up. For the 1%, inflation hikes produce massive, long term gains. For the 10%, those gains are smaller and take longer to materialize.

Meanwhile, when there is mass unemployment, both groups benefit from lower wages and are happy to keep interest rates at zero, a rate that (in the absence of a wealth tax) creates massive asset bubbles that drive up the value of houses, stocks and other things that rich people own lots more of than everyone else.

This explains a lot about the current enthusiasm for high interest rates, despite high interest rates’ ability to cause inflation, as Joseph Stiglitz and Ira Regmi wrote in their recent Roosevelt Institute paper:

https://rooseveltinstitute.org/wp-content/uploads/2022/12/RI_CausesofandResponsestoTodaysInflation_Report_202212.pdf

The two esteemed economists compared interest rate hikes to medieval bloodletting, where “doctors” did “more of the same when their therapy failed until the patient either had a miraculous recovery (for which the bloodletters took credit) or died (which was more likely).”

As they document, workers today aren’t recreating the dread “wage-price spiral” of the 1970s: despite low levels of unemployment, workers wages still aren’t keeping up with inflation. Inflation itself is falling, for the fairly obvious reason that covid supply-chain shocks are dwindling and substitutes for Russian gas are coming online.

Economic activity is “largely below trend,” and with healthy levels of sales in “non-traded goods” (imports), meaning that the stuff that American workers are consuming isn’t coming out of America’s pool of resources or manufactured goods, and that spending is leaving the US economy, rather than contributing to an American firm’s buying power.

Despite this, the Fed has a substantial cheering section for continued interest rates, composed of the ultra-rich and their lickspittle Renfields. While the specifics are quite modern, the underlying dynamic is as old as civilization itself.

Historian Michael Hudson specializes in the role that debt and credit played in different societies. As he’s written, ancient civilizations long ago discovered that without periodic debt cancellation, an ever larger share of a societies’ productive capacity gets diverted to the whims of a small elite of lenders, until civilization itself collapses:

https://www.nakedcapitalism.com/2022/07/michael-hudson-from-junk-economics-to-a-false-view-of-history-where-western-civilization-took-a-wrong-turn.html

Here’s how that dynamic goes: to produce things, you need inputs. Farmers need seed, fertilizer, and farm-hands to produce crops. Crucially, you need to acquire these inputs before the crops come in — which means you need to be able to buy inputs before you sell the crops. You have to borrow.

In good years, this works out fine. You borrow money, buy your inputs, produce and sell your goods, and repay the debt. But even the best-prepared producer can get a bad beat: floods, droughts, blights, pandemics…Play the game long enough and eventually you’ll find yourself unable to repay the debt.

In the next round, you go into things owing more money than you can cover, even if you have a bumper crop. You sell your crop, pay as much of the debt as you can, and go into the next season having to borrow more on top of the overhang from the last crisis. This continues over time, until you get another crisis, which you have no reserves to cover because they’ve all been eaten up paying off the last crisis. You go further into debt.

Over the long run, this dynamic produces a society of creditors whose wealth increases every year, who can make coercive claims on the productive labor of everyone else, who not only owes them money, but will owe even more as a result of doing the work that is demanded of them.

Successful ancient civilizations fought this with Jubilee: periodic festivals of debt-forgiveness, which were announced when new monarchs assumed their thrones, or after successful wars, or just whenever the creditor class was getting too powerful and threatened the crown.

Of course, creditors hated this and fought it bitterly, just as our modern one-percenters do. When rulers managed to hold them at bay, their nations prospered. But when creditors captured the state and abolished Jubilee, as happened in ancient Rome, the state collapsed:

https://pluralistic.net/2022/07/08/jubilant/#construire-des-passerelles

Are we speedrunning the collapse of Rome? It’s not for me to say, but I strongly recommend reading Margaret Coker’s in-depth Propublica investigation on how title lenders (loansharks that hit desperate, low-income borrowers with triple-digit interest loans) fired any employee who explained to a borrower that they needed to make more than the minimum payment, or they’d never pay off their debts:

https://www.propublica.org/article/inside-sales-practices-of-biggest-title-lender-in-us

[Image ID: A vintage postcard illustration of the Federal Reserve building in Washington, DC. The building is spattered with blood. In the foreground is a medieval woodcut of a physician bleeding a woman into a bowl while another woman holds a bowl to catch the blood. The physician's head has been replaced with that of Federal Reserve Chairman Jerome Powell.]

[justinspoliticalcorner]

Kellie Meyer at NewsNation:

(NewsNation) — The Federal Reserve on Wednesday cut its benchmark interest rate by half a percentage point, something it hasn’t done in more than four years. Federal Reserve officials were able to do this as the post-pandemic spike in U.S. inflation eased further last month. Year-over-year price increases reached a three-year low. The White House has been feeling hopeful about the state of the current economy, with officials maintaining that America can pull off a “soft landing” from inflation.  “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the Fed said in a statement.

For the first time in four years, the Federal Reserve has cut its interest rate. This cut is a half percent (0.5%).

[choppedcowboydinosaur]

Leftists talk about big tech being bad and point to the low interest rates the Federal Reserve set after the 2008 recession boosting the stock market and tech companies. But they make no further connection to the Federal Reserve as whole. Perhaps the Federal Reserve should not have this kind of power. Basically, I mean this:

[follow-up-news]

Former President Donald Trump said Thursday that he would like a "say" in setting interest rates if he is reelected, further raising the prospect that the Republican nominee could seek to reduce the independence of the Federal Reserve if he wins in November. "I feel the president should have at least say in there, yeah, I feel that strongly," the presidential candidate said in response to a question about the US central bank interest rate policy and the prospects of a soft landing for the US economy. The brief comments came near the end of a news conference Thursday at his Mar-a-Lago club in Florida.

[head-post]

Fed’s Powell marks patient approach after rate cut

The Federal Reserve cut interest rates by a quarter percentage point amid what could be an economic challenge when President-elect Donald Trump takes office next year, according to Reuters.

Fed Chair Jerome Powell said the outcome of Tuesday’s presidential election would not have a “near-term” impact on US monetary policy. Powell added that the Fed will continue to evaluate the data to account for inflation, which slowed markedly last year and is approaching the US central bank’s 2% target.

It’s a process that takes some time. It’s all of the policy changes that are happening. What’s the net effect? The overall effect on the economy at a given time? That’s a process … we go through all the time with every administration.

However, the exact destination remains unknown and will be even harder to determine if fiscal and tax policy changes as quickly as Trump has promised. Powell, who was appointed by Trump and then clashed with him during the Republican president’s first term, will now oversee monetary policy in the first critical months of the new administration.

So far, inflation and interest rates have fallen in line with the Fed’s forecast, which believes price pressures continue to ease amid continued economic growth and the labour market.

Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, did not rule out the possibility of another quarter per cent rate cut at the Fed’s final meeting of the year on December 17-18.

The easy cuts have been made, and maybe December won’t be too contentious either. Thereafter, I imagine the Fed is asking the same questions as investors – to what extent and when will the incoming Trump administration implement its campaign policy proposals?

Powell said the economic outlook was good at this point and the Fed hoped it would remain that way.

This further recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we move toward a more neutral stance over time.

The Fed’s policy statement noted that risks to the labour market and inflation are “roughly in balance,” repeating language from the statement issued after the September 17-18 meeting.

Powell stated that the change in wording did not mean that inflation had become sustainable. The Fed, he said, had always expected progress to be uneven, and policymakers have confidence that inflation is on a steady path toward the 2% target.

Read more HERE

[pharosproject]

Federal Reserve stuck between a rock and a hard place

[jeromepowell]

I made some Valentine’s Day cards for you all to share with your favorite bank examiners and/or economists! With a little help from my friend @tricksypixie of course ☺️

[fuckyeahmarxismleninism]

By Gary Wilson

In the current crisis, the banks hold the government hostage. They demand anything and everything to "bail us  out, or we will take you down with us." As long as capitalism rules, the bankers are not lying when they say this. On March 12, the Federal Reserve, Treasury Department and the Federal Deposit Insurance Corporation unveiled a plan to rescue uninsured depositors, Semafor reports. Only customers with deposits $250,000 and below are insured by the FDIC. But by invoking a “systemic risk exception,” they’ll now be able to cover larger accounts, which make up a much higher percentage of SVB’s deposits than most banks.

[memenewsdotcom]

Fed raises interest rates

[paulthepoke]

Credit Event Coming??? Michael Douville

Global liquidity and money are in short supply. Liquidity is the fuel of the economy. Bank deposits are decreasing. Things are getting more difficult to get a loan.

Proverbs 27:12 The prudent sees danger and hides himself, but the simple go on and suffer for it. Proverbs 4:13 Hold on to instruction; do not let go. Guard it, for it is your life. Are we entering another Credit Event? I remember Lehman Brothers and Bear Stears. These events start slow and gather speed until things start to cascade. Germany’s Deutsche Bank is in the news. Credit Default Swaps…