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fed live: up .75... Possibly ".50 next time?"


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#1 Rogerdodger

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Posted 02 November 2022 - 01:12 PM

In a widely anticipated move, the Federal Reserve raised its Fed Funds rate by 75 basis points. This is the fourth consecutive supersized rate hike this year. While the central bank remains focused on bringing inflation down, it does appear to be adjusting its stance.

The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

 

 

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Edited by Rogerdodger, 02 November 2022 - 01:35 PM.


#2 gm_general

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Posted 02 November 2022 - 02:01 PM

Watching the reactions I am getting seasick!



#3 pdx5

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Posted 02 November 2022 - 02:03 PM

It is silly to guess future rate increases. Because as Powell said today, there is no known science how long and how high the federal funds rate has to be to be effective on curbing inflation. Minimum rate FED is planning is 5% early next year. Beyond that, no one knows since no one knows when inflation will drop to anywhere near FED target of 2%.


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#4 qqqqtrdr

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Posted 02 November 2022 - 02:06 PM

Watching TV it seems that Powell and the FED are determined to move rates higher and higher.    They have a .75% rate today, and indicated .75% next time unless labor demand with inflation drops.



#5 pdx5

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Posted 02 November 2022 - 02:21 PM

Watching TV it seems that Powell and the FED are determined to move rates higher and higher.    They have a .75% rate today, and indicated .75% next time unless labor demand with inflation drops.

If FED had not dropped rates to zero and kept them at zero for so long, there would not be the need to keep hiking rates at record pace.

FED is (as usual) behind the curve.


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#6 gm_general

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Posted 02 November 2022 - 02:48 PM

In 2019 rate was 2.5% and total debt $75T, interest cost was $3.5T annual.

In 2021 rate was 0% and total debt $88T, interest cost was $3T annual.

In 2023 what do you suppose it will be at $92T+ and 5%? There will be a burned out hole where the economy was.



#7 pdx5

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Posted 02 November 2022 - 03:01 PM

In 2019 rate was 2.5% and total debt $75T, interest cost was $3.5T annual.

In 2021 rate was 0% and total debt $88T, interest cost was $3T annual.

In 2023 what do you suppose it will be at $92T+ and 5%? There will be a burned out hole where the economy was.

The interest cost is NOT directly proportional to current interest rate.

This is because all natinal debt is not 1 year bonds.

The 30 year, 10 year and 5 year bonds will be paying interest at the much lower rate for many years.

Bond interest is FIXED.

Only the short term bond will cost directly proportional higher costs to service.

 

If inflation stays high, the cost of servicing inflation adjusted bonds will cost lot of money to service.

I own some of those inflation adjusted bonds, and I am receiving interest nearly 8% on those.


Edited by pdx5, 02 November 2022 - 03:04 PM.

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#8 gm_general

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Posted 02 November 2022 - 03:22 PM

About 2/3 of total debt is not Federal debt, and not all of that but some rolls over, also new debt is created at new rates. In prior cases where interest cost exceeded 20% of GDP (2000 and 2008) we had a crash.



#9 EntropyModel

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Posted 02 November 2022 - 05:14 PM

The FED are like an arsonist who sets the house on fire, then mans the hose and pretends to help.


Question everything, especially what you believe you know. The foundation of science is questioning the data, not trusting the data. I only trust fully falsified, non vested interest 'data', which is extremely rare in our world of paid framing narratives 'psy ops'. Market Comments https://markdavidson.substack.com/?utm_source=substack&utm_medium=email