And there it is. Fed raises rate 0.75%

[Dtail]

Perhaps will end the day up, but my reference was that this bear market is not done yet.

As per the futures today.

 

[almost there]

Will be interesting to see if we return to historical normal rates of the past 2000-3000 years.
Or continue with the artificially low rates we have seen the past decade.

Huge move yesterday, and here we are, with the fed still under 2%.

 

[Car-Guy]

So how quickly will the interest on bank savings/money market accounts rise?

It will come, but maybe not so quickly... Slowly and small are the words I'd use.

 

[Koolau]

So how quickly will the interest on bank savings/money market accounts rise?

No clue on my own, but I have heard that banks are awash in cash. If that is true, they probably won't be anxious to raise rates to attract yet more cash. Hoping one of our resident banking experts will chime in with the real story since YMMV.

 

[Koolau]

They should have done this a year ago…I don’t see a soft landing in our future.
They’re hoping the markets help them out by crashing, otherwise they’ll need a lot more of 3/4 point hikes.

I agree, I don't think there is any way this ends well. I guess we can hope for "not too bad" instead of 2008. Just trying to figure some moves to deal with the coming unpleasantness. Guess I'll pull out my few gold coins and shine them in anticipation.

 

[GenXguy]

The market waited a day, but it's tanking now.

 

[Midpack]

They should have done this a year ago…I don’t see a soft landing in our future.
They’re hoping the markets help them out by crashing, otherwise they’ll need a lot more of 3/4 point hikes.

+1. Recessions are always part of the picture, hopefully the coming one won’t be among the worst…

 

[razztazz]

So how quickly will the interest on bank savings/money market accounts rise?

Never if they can get away with it. I asked my brokerage , "So with all the known inflation and interest rate increases when do you think money market funds will start paying something?" Ralph Kramden answer: Hummina hummina hummina

 

[daylatedollarshort]

So how quickly will the interest on bank savings/money market accounts rise?

I don't know but I not going to wait to find out. I'm moving all the odds and ends, low interest bearing accounts, like the credit union HSA, to some place like Fidelity or Schwab, where I can invest the money in short term Treasuries or CDs.

 

[ponyboy]

Looks like the Stock Market responded well to the Fed's 0.75% rate hike, as a step to curtail inflation. It's green. Hope it does not reverse tomorrow

That didnt age well.

 

[cyber888]

That didnt age well.

That's why I said "hope it does not reverse tomorrow ". I was actually pretty skeptical.

Now, I've concluded .. I won't buy the dip unit the S&P500 will hit around 3,000

Still maybe 5-6 rate hikes to go.

 

[Midpack]

So how quickly will the interest on bank savings/money market accounts rise?

Ally went from 0.5% to 0.9% before yesterdays Fed funds rate hike, so they’re raising rates some…

 

[Dtail]

Ally went from 0.5% to 0.9% before yesterdays Fed funds rate hike, so they’re raising rates some…

They were behind at 0.5, so were probably seeing some outflows.

 

[HI Bill]

Inflation is partly caused by the current fluctuating imbalance of supply and demand, which is partly caused by shipping, trade, labor and materials shortages. IMHO, these are a much larger influence than the rate the Fed sets. Can their rate hikes solve this imbalance by pummeling demand without causing a severe recession? Their tools are limited, crude, and aren’t really helping with the world’s current imbalances and inconsistent supply chains.

 

[almost there]

Inflation is partly caused by the current fluctuating imbalance of supply and demand, which is partly caused by shipping, trade, labor and materials shortages. IMHO, these are a much larger influence than the rate the Fed sets. Can their rate hikes solve this imbalance by pummeling demand without causing a severe recession? Their tools are limited, crude, and aren’t really helping with the world’s current imbalances and inconsistent supply chains.

So you don't think the fed created a lot of this problem?
To me / the huge deal was artificially low interest rates long after the great recession. (An extra decade) And the printing heck out of $$$$ for no real reason.
Both continued far beyond logic. The stock market liked it, so nobody complained.
And now, here we are. With rates still at historic lows. After the minor hikes.
What is the fed target today? 1.50-1.75%? Thats comical. With inflation around 16% using the late 70's early 80's metric.

 

[Koolau]

So you don't think the fed created a lot of this problem?
To me / the huge deal was artificially low interest rates long after the great recession. (An extra decade) And the printing heck out of $$$$ for no real reason.
Both continued far beyond logic. The stock market liked it, so nobody complained.
And now, here we are. With rates still at historic lows. After the minor hikes.
What is the fed target today? 1.50-1.75%? Thats comical. With inflation around 16% using the late 70's early 80's metric.

Yeah, it took us a while to get here and it will take a while to unwind it. Best we can hope for is a hard landing and not a crash. No soft landings this time, I don't believe. YMMV

 

[teejayevans]

So you don't think the fed created a lot of this problem?
To me / the huge deal was artificially low interest rates long after the great recession. (An extra decade) And the printing heck out of $$$$ for no real reason.
Both continued far beyond logic. The stock market liked it, so nobody complained.
And now, here we are. With rates still at historic lows. After the minor hikes.
What is the fed target today? 1.50-1.75%? Thats comical. With inflation around 16% using the late 70's early 80's metric.

Too much stimulas spending, low interest rates, moving all manufacturing offshore into China, and incompetence in the government and boardrooms of major corporations.

 

[pb4uski]

All of the above, but I think that keeping interest rates artificially low for the last decade or more was a major cause and that is all on the Fed. Once the Great Recession was over they should have been slowly unwinding QE and raising rates back to the levels that existed before the Great Recession.

The Fed needs to focus on its dual mandate of employment and inflation and ignore what the stock market does and thinks.

 

[Koolau]

All of the above, but I think that keeping interest rates artificially low for the last decade or more was a major cause and that is all on the Fed. Once the Great Recession was over they should have been slowly unwinding QE and raising rates back to the levels that existed before the Great Recession.

The Fed needs to focus on its dual mandate of employment and inflation and ignore what the stock market does and thinks.

Probably good that I'm not the FED Chair. I'd set up a direct line to the White House (a green phone.) When I hear that they are planning to dump a trillion or two from helicopters, I'd be on the phone telling them, I'm getting ready to withdraw a similar amount from the money supply - or if I can't, I'm raising interest rates when the first dollar hits the ground. See what I mean? Bad idea for me to be in the FED. YMMV

 

[audreyh1]

The Fed easy money certainly has kept asset prices inflated and the stock market high for a very very long time.

But the big price increases are due to massive supply chain disruptions first from Covid and then some from geopolitical disruptions.

Scarcity of things will cause prices to rise, but raising interest rates does not improve the scarcity problem. It’s going to take a while to sort out the global supply issues, and the Fed can’t help with that. I guess they can try to reduce demand.

We’re still not down to where we started 2020, and I thought the indexes were terribly high at the beginning of 2020.

 

[luckydude]

Supposedly Fed language indicated no repeat next month which calmed the markets.

Right after the last hike of 50 bps the Fed also said that 75 bps hikes were not on the table. Yet here we are. They have contradicted themselves so many times this past year that it is hard to put credence on anything they say.

I wouldn’t be surprised to see 100 bps hikes going forward.

 

[Gumby]

I don't understand why people spend so much time treating Fed statements as some message from the Delphic Oracle. It doesn't matter what they say, it matters what they do, and they will do what they feel they need to do at the point they do it. Stop trying to front run them and you'll be much happier.

 

[MichaelB]

The Fed needs to focus on its dual mandate of employment and inflation and ignore what the stock market does and thinks.

The problem with this is while the Fed mandate is inflation and employment, it’s raison d'etre is banking stability. When banks primary business was lending and payments, the stock market didn’t matter as much. Now, however, banks aren’t just intermediaries, they also invest and finance investors. Stock market volatility threatens banks liquidity and solvency, so the Fed has to monitor and, when necessary, act.

 

[VFK57]

Many financial articles writers point out on fighting inflation with increasing of rates will lead to a recession and the Market reacts already. We may already are in recession.

 

[SecondCor521]

I don't understand why people spend so much time treating Fed statements as some message from the Delphic Oracle. It doesn't matter what they say, it matters what they do, and they will do what they feel they need to do at the point they do it. Stop trying to front run them and you'll be much happier.

It's probably a bit of "What do you do all day?"-ism. The rose bushes don't need pruning, and I don't really feel like mowing the lawn, so I might as well Monday-morning quarterback and Magic 8-Ball the Federal Reserve. Much more fun and interesting to me than the folks trying to solve Social Security on the other thread. I'm not unhappy, by the way.

The talking head guests on CNBC have started to criticize the Fed lately for "credibility". What they really seem to mean by that is reliability - mean what you say and say what you mean. They just want to be able to make money reliably and predictably.

I think Fed chair Powell would like to be reliable. He addressed the credibility point in the previous Fed meeting about six weeks ago by arguing that Fed statements have had an impact on the market even in advance of Fed actions. I suspect he, and the rest of the board, would like to have the "jawboning" tool in their toolbox. I'd like to think that they're carefully curating it, but I don't really know how well they're doing.

On the flip side is being "responsive" and "data-driven", which Powell also says on a regular basis. Overall I think they do a good job of balancing - they provide a fairly clear assessment of where they think things are going, how they're planning to react, and incorporating non-US non-monetary issues as they unfold.