Thoughts on the Fed Rate increase?

[Running_Man]

The Federal Reserve is trying to attempt something that has never been successfully implementing - to get off zero interest rates. So the likelihood of this working is also not too probable. The very business that is created as a result of super low interest rates become imperiled with the rise in rates causing contraction and leading to need for more stimulus. We shall see but it seems to me the economy worldwide is much weaker than it was a year ago and this is not going to help improve economics, only banks that might have upcoming stress.

 

[Mulligan]

The Federal Reserve is trying to attempt something that has never been successfully implementing - to get off zero interest rates. So the likelihood of this working is also not too probable. The very business that is created as a result of super low interest rates become imperiled with the rise in rates causing contraction and leading to need for more stimulus. We shall see but it seems to me the economy worldwide is much weaker than it was a year ago and this is not going to help improve economics, only banks that might have upcoming stress.

Plus, they have never attempted to raise rates so late in a "recovery cycle" along with official inflation at a very low rate. Thank you very much Feds... You are insuring my "long preferreds" stay safe for quite a while.


Sent from my iPad using Tapatalk

 

[VFK57]

It's way overdue because they went way down to an unhealthy low rate to begin with.

As for " no inflation"?. Don't go by the CPI. That's been disputed as a poor indicator. It's the governments way of sugar coating the boogeyman so it seems less harmful to us. Now it's even less informative as its heavily skewed by bargain basement gas prices.


Eggs are more than 25% higher than last year, milk costs noticeably more, and have you gone out to eat at any restaurants lately? They are charging a lot more for meals. Prices have risen and all the other indicators for economic growth went up within the last two months whereas summer was kinda flat. It was definitely overdue.


Sent from my iPad using Early Retirement Forum

+1. Rent and housing prices went through the roof in some regions while Gas prices are down.

 

[jim584672]

They say a 2% inflation rate is stable prices. Sorry but 0% is stable in my book.

 

[audreyh1]

They say a 2% inflation rate is stable prices. Sorry but 0% is stable in my book.

Modern history indicates that economies don't work well at 0% inflation. 2% inflation seems to be the minimum for a healthy growing economy.

 

[ESRwannabe]

Now almost exactly one year out from FIRE, I would just LOVE to see my investments do SOMETHING. Seems they have been stuck in neutral for what, 4-8 months? I hear a lot about the Feb interest rate increase (newswires today) and generally feel that it will be a good thing, and a sign that the economy has truly "turned the corner". I have been somewhat eager about this day... but I also still see a lot of skittishness in the global economy. Love buying gas for under $2/gal too, but also know there are consequences to that as well.

What are the forums thoughts on the effect of the fed interest rate raise and the outlook for 2016?

Be glad your investments are neutral... my investments in the MLP sector have been dropping with the price of oil.

All the hand wringing on the Fed rate is just journalism in action. They have to have something to talk about or nobody will tune in to see their ads.

I don't think the interest rate raise indicates anything about the economy. With most of the world in recession its likely we will also go into one after the presidential elections.

If I were going to retire soon I'd make sure I had 3-5 years living expenses in cash.

 

[ESRwannabe]

Anyone want to bet that we'll see zero again before we see 3% ?

I think the US and much of the world is trapped in the same disaster Japan has been in for decades. My expectation is multi-decade long stagnation. Interest rates will stay low. My guess is under 1%.

 

[tmm99]

I think the US and much of the world is trapped in the same disaster Japan has been in for decades. My expectation is multi-decade long stagnation. Interest rates will stay low. My guess is under 1%.

Ouch, we don't want what happened to Japan happen here....


Sent from my iPhone using Early Retirement Forum

 

[Running_Man]

Modern history indicates that economies don't work well at 0% inflation. 2% inflation seems to be the minimum for a healthy growing economy.

https://www.minneapolisfed.org/community/teaching-aids/cpi-calculator-information/consumer-price-index-1800

From 1800 to 1942 there were periods of inflation and deflation in the USA. At the end of 1942 prices finally stayed above prices in 1800 for good, since then inflation has been much more of an issue, the issue currently is debt is so high without an ongoing amortization of it via inflation it would become unmanageable over time.