Watching today's rate decision was fun
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ExFlyBoy5
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Increase this time and forecasting two next year.
capjak
Full time employment: Posting here.
up 0.25 % as expected
explanade
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I heard some mention that it's not just the interest rates but the Fed plans to reduce the size of the balance sheet from the QE years.
So that will cause additional reductions in the money supply.
So that will cause additional reductions in the money supply.
capjak
Full time employment: Posting here.
Correct/agree (as does several self proclaimed experts) tightening of the money supply (i.e. buying back the Trillion Dollar stimulus QE1,QE2 can't remember if there was a third... plus raising rates from negative rates to 2.5%+) too much or too quickly will have an adverse effect on growth to say the least.. and could/may/will result in a hastened greater great recession.
The Fed's crystal ball has been cloudy in the past.
They use old/current data to predict/project the future.....I heard they use a crystal ball and then verify/confirm with a ouija board....
Bamaman
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We of course know the rates have been ridiculously low for quite sometime. But with the planets lining up as they have, there's no reason for rates to rise. The stock market has already spoken over the past few weeks, and it's cost $ trillions out of pension values of the working class Americans. That's about as political as I'll ever get on here.
RAE
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Yeah, I personally think they made a mistake today by both raising rates, and continuing to unwind the balance sheet. The economy is weakening, but most of the data they use apparently doesn't show it yet. But I'm not an economist, so what do I know......
capjak
Full time employment: Posting here.
An economy dependent on 0% interest rates isn't robust, it's on life support.
Stock markets having a taper tantrum is not in the Fed's mandate of ""promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates".
As a side twist... why do we even have a Fed trying to control an economy by reading chicken entrails as a gauge of its a good omen or a bad omen? Let the market decide what rates should be.
Stock markets having a taper tantrum is not in the Fed's mandate of ""promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates".
As a side twist... why do we even have a Fed trying to control an economy by reading chicken entrails as a gauge of its a good omen or a bad omen? Let the market decide what rates should be.
Nothing really special here. Of course a slowdown will be political fodder for 2020 and keeps people’s minds off of things to make everyone better off. Perhaps we will all have an opportunity to use some dry powder. Sigh.
Dtail
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RAE
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Well, that's only a guess on his part, because this type of thing has never been done before - so we are in uncharted territory.
target2019
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Waiting for Godot...
SecondCor521
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In his press conference Powell stated that the Fed planned on, and continues to plan on, the balance sheet moderation activity being on autopilot and using rate policy to adjust and respond to the activities in achieving their mandated goals.
I believe they are selling $50B per month currently. I also think that there is some long term balance sheet target ($2T-$2.5T maybe?), so if they get to that point they would presumably shut down or slow down the sales.
I believe someone asked Chairman Powell about the tightening effect of the balance sheet sales and in his answer he seemed to me to state that he did not believe it to have much of an impact. Reading between the lines, I think he seems to think that rate policy and rate changes have a larger impact.
@Free bird, I did watch the entire press conference with Chairman Powell. He stuck very closely in his answers to the Federal Reserves mandate from Congress. He stated clearly that the FOMC is not political and is determined to stay that way (when asked whether the President's recent comments affected the Fed's decision today). He also indicated that they don't really take the stock market behavior itself into consideration - they look more at underlying economic data.
@JDARNELL, Chairman Powell did state clearly several times that the FOMC is predicting a moderation in growth in 2019, but they still expect growth. In other words, the economy is going from 3.x% growth this year to ~2.5% growth next year. But still growth, not a contraction. Not sure if that's what you were meaning in your post #15.
And a general comment: Personally I think the current Fed is doing a pretty decent job. I think their mandate is for full employment and a symmetric inflation target of 2%. Today the unemployment rate is very low (3.7% or so IIRC) and inflation is just under 2%.
I believe they are selling $50B per month currently. I also think that there is some long term balance sheet target ($2T-$2.5T maybe?), so if they get to that point they would presumably shut down or slow down the sales.
I believe someone asked Chairman Powell about the tightening effect of the balance sheet sales and in his answer he seemed to me to state that he did not believe it to have much of an impact. Reading between the lines, I think he seems to think that rate policy and rate changes have a larger impact.
@Free bird, I did watch the entire press conference with Chairman Powell. He stuck very closely in his answers to the Federal Reserves mandate from Congress. He stated clearly that the FOMC is not political and is determined to stay that way (when asked whether the President's recent comments affected the Fed's decision today). He also indicated that they don't really take the stock market behavior itself into consideration - they look more at underlying economic data.
@JDARNELL, Chairman Powell did state clearly several times that the FOMC is predicting a moderation in growth in 2019, but they still expect growth. In other words, the economy is going from 3.x% growth this year to ~2.5% growth next year. But still growth, not a contraction. Not sure if that's what you were meaning in your post #15.
And a general comment: Personally I think the current Fed is doing a pretty decent job. I think their mandate is for full employment and a symmetric inflation target of 2%. Today the unemployment rate is very low (3.7% or so IIRC) and inflation is just under 2%.
Helena
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There are many whose investments depend on interest rates returning to normal.
There are many whose investments depend on interest rates returning to normal.
Each of those is most definitely "political" when the appointee running them decides what will or will not be prosecuted/defended/401c3'd, etc.
The Fed isn't selling anything.
As MBS and Treasuries mature, the Fed is not using the payoff to buy new securities to replace them.
https://www.stlouisfed.org/open-vault/2018/july/how-fed-reducing-balance-sheet
Which kinda raises the question "how is this 'tightening'?" and causing all the EM grief when all they are doing is stop adding more to their balance sheet? I see it drains liquidity in that funds go to the Fed and don't recirc back out, but they just invented those funds with a keystroke in a spreadsheet to begin with...
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SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The Fed isn't selling anything.
As MBS and Treasuries mature, the Fed is not using the payoff to buy new securities to replace them.
https://www.stlouisfed.org/open-vault/2018/july/how-fed-reducing-balance-sheet
Which kinda raises the question "how is this 'tightening'?" and causing all the EM grief when all they are doing is stop adding more to their balance sheet? I see it drains liquidity in that funds go to the Fed and don't recirc back out, but they just invented those funds with a keystroke in a spreadsheet to begin with...
Thanks for the article; I found it quite accessible. I think you're right; I should have used "reducing the balance sheet by $50B monthly" instead.
I don't know the answer to your question. I'm an amateur at Fed stuff. Most of the financial folks I listen to talk about it as tightening liquidity; I just assume they're right. I was a little surprised at Chairman Powell's implication that the balance sheet reductions were not as impactful on the economy as the financial pundits seem to imply.
