and we make jokes about astrologers...?!
Big mistake by Powell,,,,,,to soon after the White Castle and usually wrong Jimbo Cramer jump on the bandwagon for keeping rates low.
Just confirmed that the FED and the Supreme Court have become politized and far from impartial
1
At present, we’ve got a 1.3% structural growth rate with very limited prospects of additional cyclical benefit. We can’t rule out a short-lived burst of productivity resulting from changes in taxes and regulation, and it’s possible that the unemployment rate could move slightly lower still. Yet even in an optimistic scenario, the idea of 3-4% sustained real GDP growth “as far as the eye can see” is bonkers.
On the interest rate front, if one examines the relatively low-inflation period since the 1980’s, we’ve typically observed 10-year Treasury bond yields about 2% to 2.5% above the rate of real GDP growth, and roughly equal to nominal GDP growth. Treasury bill yields have typically stood 0.5% to 1% above real GDP growth, but slightly below nominal GDP growth. Even if one assumes that real GDP growth will push toward 2% annually, those figures suggest that a neutral Treasury bill yield would reasonably fall in the area of 2.5-3.0%.
2
Another institution politicized and another cabinet member shown to be a shill and a weakling, sacrificing long term stability for short term gain.
January can't come soon enough...
1
The Tariffs are working. Raising taxes on consumers before the holidays is slowing the economy.
2
Last month, Jerome Powell indicates that we’re a long way from neutral. Yesterday, Trump rips Powell a new one. Today, Powell says we’re near neutral. Why isn’t the headline “Trump destroys (yet) another American institution?”
8
two words. ponzi scheme.
1
This would be pure market manipulation and be criminal under any lawful congress.
8
Was it the President's gut that told him to invest in casinos in Atlantic City? Was it his gut that told him to invest in the World Football League? Just curious.
8
The gut is not the brain - small detail
2
Every time the NYT reports on interest rates I think it critical to remind people of the difference between “nominal” and “real” rates. While the Fed has by definition no impact on long-run real rates of return, the real rate on long-term bonds, which is of much greater concern to stock investors, is unquestionably affected by government borrowing.
So perhaps, readers, instead of pointing at either Republicans or Democrats, or this Powell guy who really has almost no impact on your daily life, you should tell your government when passing a massive tax cut, don’t bipartisan approve a $800 bn military spending bill, especially when you have a rising inflation rate and an economy producing above capacity.
4
Powell knows exactly what he’s doing, as do the rest of the members of the Fed. Unlike Trump, Kudlow and their whole demented, incompetent Krew, the Fed is quite skilled at moving markets and does so quite effectively - if and when it wants. Powell wasn’t about to reward Trump’s bad behavior with a boost before midterm elections and as Mueller does in the face of Trump’s impotent hectoring via Twitter, Powell just ignored him. “Gosh, did you hear a noise? No, it must have been the wind in the dry autumn leaves.”
Now that the Trumpublicans have taken their drubbing at the polls and in the markets, Powell dished up a little sweetening to reassure investors and the international banking community that he’s prepared to go slow, pursue moderation in all things, and provide a spoonful of sugar to help the interest rate medicine go down - if and when the Fed sees fit; not whenever the truculent, loudmouthed Tangerine Toddler in the Oval Office demands it.
Take that, Fearless Leader and Supreme High Commander Trump!
4
Just below us no number so it leaves a lot to the fantasies that rule the stock market. We will see what just below means soon. Maybe just below what we expected.
The Trump rally has become the volatile careening mess one would expect from a president like Trump. Huge unbalanced tax cuts that have driven up the national debt passed while the economy was growing, on the hope that they would force the Congress to cut middle class programs, have pleased few but big corporate tax scofflaws.
8
So, the Fed got bullied. Over here, in India, the situation is similar. The RBI is getting brutalised. Does volatility in the Stock Market, the sole criteria for where rates should be ? That volatility in all likelihood, is due to Trump's tariff war, and the possibility that China could resist such high handedness, emerging from this scuffle in a better shape than Trump imagines. That has got the market worried. Because Powell is a softer target than Trump, the "analysts" find him easy prey. Hope Powell stands his ground.
10
Donald (I'm my own expert) Trump, who thinks he knows more in his "gut" than any expert in any field knows about her own field, must blame someone for anything that is not what he wants. The economy has cycles no matter what politicians do. Some of it is in their control; much of it is not. The problem for (with) Trump is that he sees himself and paints himself as the boy-wonder, as the "job creator," and as the guy who does what "no other president" could ever do. So an economic downturn is horrifying to him because it shows that he, too, is human with limited powers to make things "wonderful." I believe he cannot remove Powell, but he will blame him (along with Democrats, liberals, elites, Clinton, Obama etc.) for what likely will be a less than stellar economy by 2020.
14
Powell blinked and capitulated to Trump's pressure and criticism. So much for the last shred of Fed "independence." Powell's credibility is shot. It is truly a disgraceful capitulation and a dangerous precedent set. When does Powell next go before Congress? He should be skewered.
72
I do believe Chairman Powel is independent and changed his comments from “a long way from neutral” to “just under neutral” because data regarding the economy, and negative forecasts including effects of tariffs and Corporate/US Gov debt expansion, were updated. He made the appropriate adjustments. He pointed out the current risks. If Trump introduces his 25% tariffs in a slowing economy, the stock market will be effected. Are we going to blame the Central Bank for Trump’s idiotic trade and tax policies?
22
What the Fed chair doesn't mention is the there are numerous signs that growth is slowing and inflation is falling; nowhere is the latter more evident that crude oil. Europe is nearing a recession, developing countries are in full crash mode. We've been lucky. It has nothing to do with trade wars or Trump and everything to do with cycles and we are at the end of ours. It's not the end of the world, just entering a period of consolidation which is nothing but healthy in the long run.
7
I mean, is it actually healthy? The market contracts every 8 to 10 years. The poor and get squeezed and the rich come out with a little bit more. It can only happen so many times
1
@Angry
Some people need to feel they have control, so they convince themselves they know with certainty how things are working.
I doubt there's one person alive who can tell with the kind of accuracy this analyst carefully laid out before us. ...too many moving parts.
But yes, to your point, I don't think the poor should be procreating at this point in time. The future will only make them less valued.
So, this is now the state of our world?
Trump controls the Fed, through his tweets and his interviews?
Put your money in your mattresses, people. Or in a big hole safe from all weather in your back yard.
11
This is nuts. Everyone knows that emotion, especially fear, drives markets. Add in the volatile nature of this president, and you have a perfect storm of variables.
The Trump economy was built on the quicksand of needless tax cuts and stimulus for businesses that didn't want or need them. it produced the highest of expectations, along with the irrationality of thinking the boom will continue forever.
It can't. Already savers are locking the doors against the icy winds of decreased consumer demand, corporate layoffs, and a ballooning deficit.
The country is in a hole that Trump dug all by humself, propped up by foolhardy Republicans.
20
Remember Bernanke, another stable genius who drove us with steady hands right off the cliff?
4
Several months ago, I was on a flight (in the first-class cabin) from Miami to Boston. Waiting for take-off, I overheard a man working on a deal to finalize the sale of a hotel in Miami Beach. His next call was to his fellow Sellers, where they enjoyed a hardy laugh over how quickly everyone had forgotten 2008 when they bought the distressed property, and how they plan to re-purchase the same hotel in 2020 at a deep discount. These Sellers believe what many people suspect - that the current economy is completely unsustainable, and that its implosion will be swift and painful to many.
18
As a practical matter, Trump never cared much about interest rates because he usually stiffed his creditors by threatening to default. Now his personal creditors are the Russians via Deutchebank and laundered real estate deals. Those folks won't take 'no' for an answer. Thus Trump's mystifying admiration for Putin. Whenever they say it's not about the money, it's about the money.
21
All Trump cares about with the economy are the quarterly growth rates and unemployment figures (just the unrevised and often wrong first estimates). He's probably been told his tax cut will soon peter out as a stimulus, so he needs the Fed to keep rates low to juice the economy. He doesn't care about inflation or the next recession. That will be someone else's fault.
He'll happily blame any future economic problems on the Democrats or Nancy Pelosi or the deep state or immigrants, and his base will eat it up at his never ending rallies. Soon, they'll be chanting 'lock her up' about Nancy and 'build the wall' to fight the immigrants supposedly stealing our wealth.
It's so predictable.
14
The Fed slowing the pace of rate hikes and perhaps stopping after the expected December hike is very good news for the U.S. economy and stocks.
The U.S. economy runs on debt, and we can't make debt too expensive or things shut down. The 5% mortgage rates are slowing down housing even more, for example, and a 1% increase in interest rates adds $220 billion per year to the budget deficit.
This dependence on debt is a result of our inequality. For example, U.S. total household wealth exceeds $100 trillion, or $800,000 per family if split evenly. However, the median (50th percentile) family has about $100,000. At pre-Reagan inequality, the bottom 99% of families would be getting $7,000 more per year in income.
This results in excessive debt dependence, to try to make up for that shortfall.
Further, lack of anti-trust enforcement is causing corporations to lever up through acquisitions, to achieve monopoly profits.
Until we fix our inequality and monopoly problems, the Fed will have to roll the dice on debt bubbles.
22
If only this had any impact on wages. Sigh. Maybe someday...
3
What a coward. Letting himself be bullied by Trump. Does anyone in the Republican administration know what leadership is? Taking a stand based on the facts, the truth, what's right. Being willing to face a sacrifice for the sake of the future. The reason the Fed should keep raising rates, so they can they have something to lower during the post tax hike crash. Once the nation comes down off the sugar high it's on, it's going to need something to soften the blow. If the rates are still low then the Fed's got nothing.
10
Look at the VIX. Barely budged. Lots of fear, and everyone is playing chicken / musical chairs
3
All Trump has to do is discredit his own appointee at the Fed and the poor man immediately stops the necessary interest rate increase.
Great lets help Corporations to borrow billions and billions more so that they will soon collapse under their massive debt and the government, the low income people have to bail them out again.
Criminal and cowardly.
20
When the cumulative damage to the economy done by Trump becomes manifest there won't be any "innuendo" needed.
19
This trump character is bad news.Unchecked, he could do the US what he did to the USFL. Furthermore, in my opinion, he should be forced to resign, or removed from office.
16
I'd trust Emperor Trump's "gut" over any amount of research, data, information, or knowledge --- wouldn't everyone?
21
Was it algorithms or individuals that overreacted to the Fed Chair speech?
14
It is long past the time when everyone, (the press, the congress, the judiciary, the Fed, CEOs, etc.etc.etc.) should simply ignore Trump.
"If a blowhard tweets inane comments but no one pays attention does it really have an impact? "
Apologies to George Berkeley.
25
I read the transcripts from his speech that are posted online, along with the Q&A session. I simply cannot find where he made a statement that we are approaching a “neutral” level that would no longer provide stimulus to the economy. Maybe it's there and I missed it, but I double checked.
I have no doubt he made this statement, since it has been so widely reported on. However, it simply isn't in the transcripts from his speech that are online. Maybe these remarks were made off the record? If someone can cite where those comments were made, I would appreciate this!
6
Nothing is said about QT, however, Apparently, the Fed is sticking to the $50 billion a month reduction rate. So if liquidity moves back into equities, then the 10-year may resume its move upward. This will definitely be felt in the market. Long-run, valuations will inevitably be lower.
5
So, I guess that the Fed Chair got his feelings hurt from Trump's tweets and interview with the Washington Post.
So much for independence from the Executive Branch.
4
If the current Fed rate of 2.00%-2.25% is near neutral, that means our economy is very weak.
The expansion that began in June 2009 (one of the longest in U.S. history) is nearing the end. Unemployment at 3.7%, and the 10yr-2yr yield curve (under 0.25% and falling), are classic end-of-cycle indicators.
Mr. Powell's comments -- that interest rates with a 2.x% handle are still appropriate -- are ultimately bearish for the U.S. economy (and bearish for stocks, despite the reflexive one-day market rally today).
Invest accordingly.
14
Fine. Don’t raise the savings rate. I just will put more money in the bank and spend less to make up for it.
4
The Fed's reputation will not be harmed by Trump's comments, except perhaps with Trump's base. Since 90% of the general population, much less Trump's base, doesn't even know what the Fed does, I wouldn't be too worried if I were the chairman of the Fed.
7
@karisimo0 The Fed's reaction may be harmed by Trump's comments, but it will really be harmed by Powell giving in to Trump and destroying the Fed's independence. It doesnt matter how much of the population knows what the Fed does. The small percentage that does know controls most of the assets and will act accordingly, which will be bad for the US economy.
9
@Mark
Would that one of the small percentage be the potus.
I see the Fed chairman's comments as a sign of caution on the Fed's part. Largely ignored in today's comments were hints that the Fed is concerned, rightly so in my view, that the economy is yet again experiencing the growth of potentially dangerous asset bubbles. The relatively precipitous market drop in October when the Fed's words were more direct regarding the future course of interest rates no doubt alarmed the Fed's governors, understandably so, and led to today's softened statement. As Powell said today in no uncertain terms, the economy is vulnerable to the sudden bursting of these asset bubbles. I really do not believe that Trump's bloviations had anything to do with the Fed chairman's statement. And I think we're headed for a significant market pullback, sooner than later. Hopefully not as severe as in 2008, but the Fed's arsenal is extremely limited this time around, and that could spell trouble.
10
He caused the market to fall by saying many interest rate hikes were on the way. Then he backed out of his previous speech. Fed is no longer needed. Simply do not raise rates unless inflation is at 3%
1
Here we see the true connection between central bank welfare state for Wall St. and the lip services and trickle down nonsense that is handed out to the rest of America.
Remembering that 90% of the stock market is owned by less than 5% of the population this jawboning asset prices higher using "our money" is simply welfare for the rich in the many trillions of dollars. Anyone calling this economy and stock market capitalism doesn't know a darn thing or is willfully lying to themselves.
The central bank has destroyed price discovery and made risk assessment a joke. Nobody on Wall St. cares about "fundamentals" only what the politburo in the Eccles Building is doing and front-running that "trade" up or down. Its a giant skimming operation financed and supported by the central bank to inject "confidence" via asset price inflation. It's "wealth effect." But, only to a tiny sliver of the population. Its all about painting green arrows on the nightly news to con everyone into thinking they are all getting rich, but, their not.
Meanwhile, GM workers are forced to leave the living wage jobs with benefits to become Uber drivers, pizza delivery drivers, janitors, or work multi part-time jobs, temps, and gig poverty jobs. Wall St rallies while Main St. continues the process of becomes its feudal prisoners. Thanks to our economic saviors at the Federal Reserve.
17
@Smoke'em If U Got'em and yet inflation is historically low and unemployment is low as well. The FED doesn't really control wages so it doens't have much to do with wage stagnation.
2
@Bill smith
The central bank's mandates are price stability and full employment. They have another mandate now, stock prices. But, how is any inflation "price stability" when all inflation is caused by monetary policy? Inflation at 2.8% isn't low at all and if it stays that rate will reduce the purchasing power over 50% in 20 years. Couple that with flat or declining wages and you can see why 60% of American have no savings and have gone from middle class to working poor. Trying to justify wealth transfer via currency devaluation and interest rate manipulation that leaves savers fishing through their couch pillows for change and workers groveling for scaps is morally bankrupt.
8
Contradictory claptrap from the Chairman of the Federal Reserve Bank. No one can absoultely calculate "neutral" on the Fed's benchmark rate but conventional economic thinking suggests that to get to a neutral nominal rate, we have to add in expected inflation. That takes us to a neutral nominal range of ca. 3.5 percent to 5.5 percent.
How can Powell state today that we are 'just below" neutral and why did he state just a few weeks ago that "we are far from neutral." Has he been taking advise from the economic genius in the White House? Very dusturbing turn of events.
11
Apparently most commentators wanted an increase in interest rates, the higher the better. I am sure that the media will be able to find and quote dozens of financial experts who will say that unemployment is too low and inflation is too high.
1
@Robert Winchester "The higher the better"? who is saying that? Experts, including most of the dispassionate and civic-minded Fed staffers, want interest rates that are consistent with the Fed's dual mandate: low and stable inflation and full employment. Estimates for what those should be tend to be around 4% for (short term) interest rates, 5-6% unemployment, and 1.5-2% inflation. A lot of analysis goes into those calculations.
3
"I have a gut..." Donald Trump
Yes Donald, we couldn't help noticing it. Have you given any thought to exercise? Well then how about buying pants that fit?
Just for the record, your tie hanging down to your pants inseam doesn't hide the bulge it crosses.
Look Donald, many people believe you are a clown, but do you have to dress like one? I mean it's bad enough to behave like a clown, wear clown makeup and sport a clown pompadour, but dressing the part is just not helpful.
And while you think with your gut, bigger isn't better. You're proof of that.
Finally, are you sure you attended college, or is that just another stretch of your gut?
49
So Trump was right again. This is getting boring.
3
I miss Janet Yellen!
18
"Mr. Powell has insisted policymakers are not taking orders from Mr. Trump" Right.
How about this: "If you want to stay in that job, then say something, or do something, that will stop this market downturn!" That's not exactly an order. More like an offer he couldn't refuse.
11
Trump, the great economist. How many bankruptcies?
35
“Investors have worried that the Fed’s rate increases would dampen the economy, bringing a close to one of the longest bull markets in United States history.”
Thank you President Obama.
Trump is already figuring out who to blame when it ends in 2019.
24
No real news. Markets jumped just because Powell made an attempt to placate POTUS.
28
During the past 10 years the self-serving Fed has transferred trillions of tax dollars and lost interest on savings from the middle classes and seniors to Wall Street. The results include a "recovery" for primarily the wealthy, increased income inequality, reduced spending and labor participation, and stagnant wages for all but the wealthy. The NYT has previously identified and reported on these correlations. The Fed has begun to move away from this policy during the past 1-2 years, but those who fear a loss of their market return will likely use their power to put the brakes on normalization of interest rates. If Wall Street can't survive without public assistance, perhaps a new paradigm for the economy will need to be developed.
18
@RC
Until the poor own significant amounts in stocks, bonds, mutual funds, etc the market rising will favor the wealthy. Apparently this is difficult for some to grasp.
10
@Shamrock
It takes money to buy stocks. Something many have difficulty grasping. When you can't even feed yourself or family how does one participate in the central bank's welfare state for the rich?
7
Wall Street is not the economy. Wall Street is only one aspect of a the complex US economy.
1
All Fed chairmen or chairwoman since Volcker and Greenspan have been "jawboned" by administrations to keep interest rates low.The Federal Reserve is designed to be independent so they can read economic data free of political interests.Trump's economic literacy is particularly disastrous.Anyone who has had at least four bankruptcies should not even pretend to give economic advice.I am still waiting for someone to prove to me that Trump took a course in macroeconomics and aced it!
21
@JanetMichael SIX (6) bankruptcies.
9
Volcker, certainly; but Greenspan —?!
We're giving the Fed too much 'responsibility' for the economy which, while it reacts to the Fed's words and actions, is not the sole influence.
The markets have always known the rates were going to go up. What the markets did not know is how the Administration was going to throw sand into the gears.
In Jan 2016, the Dow was at 19,963, by Jan 2018, it rose to 26,439 and during that time, the Fed raised rates. trump loved the condition of the economy and bragged that we were headed to 30,000.
Then, in March 2018, trump initiated the tariffs, and the markets have been roiling between 26,439 and 24,600 as a result of the uncertainty of who's going to get hit next.
Will tech stocks be barred from trading with China - that sector has been red for almost all of 2018? Wheat and Soybean futures are down and trump is throwing $12-Billion to fix his wrong. Wood, steel and aluminum costs are all up which has increased the costs of building a house, a washing machine, a car, and so on.
For trump to rest all market problems at the Feds doorstep is just more of his Teflon character and financial career.
7
Trump told Secretary Powell to chill out with all of these rate increases causing havocs in the markets. To many and to fast. Appears Powell got the message! Good. Now either China gets real and comes to fair trade terms with us, or Trump turns up the heat by increasing trade tariffs on their products big time! They gotta be hurting this holiday season by now....
1
I honestly think Powell mispoke in October when he mentioned that rates were a long way from neutral. There is a push to increase rates, but doing so will plunge us into a recession. The fed will be more dovish in 2019.
4
For too long, the Federal Reserve has been a circus; the Chair has been a ringmaster moonlighting as a propagandist for the White House. And now no act is too trivial for America's front pages. The lead photo for this story -- a giant screen projecting an image of a Great and Powerful Suit, surrounded by lots of giant curtains -- says it all: It's right out of "The Wizard of Oz!" The legend has become fact, I guess.
4
Yes, I remember a lot of Fed propaganda was spewed when Obama was President. Why did you expect anything different with the Fed under Trump?
1
@RR
I agree, that is an excellent image choice, It projects the most untouchable and all powerful rulers.
The (Republican) elephant in the room is that markets do not know whether Mr. Powell's statements are based purely on his economic analysis or are a response to Mr. Trump's criticism.
The perception that the Fed may be manipulated by political pressure undermines confidence in markets.
39
Powell also said the economy is in better shape than before the financial crisis. Thank you, Obama. Thank you, Democrats. You repaired and strengthened the economy and presided over the longest period of growth in recent times. Now if we can just restrain Trump from wrecking it all!
110
Now we know, as if we did not already, who really has the power and gravitas in our economy. Powell is a REAL economist, not a deranged narcissistic sociopath gritting moron. The Market will not suffer Trump's infantile egocentric bullying abusive maneuvers - they know he is doomed and that smarter heads will prevail.
Trump is running out of scapegoats - he has already blamed everyone within his sphere for his own incompetence and crimes and the American people (those that were previously conned) are beginning to wake up to this infant's behavioral problems. He is the same spoiled, entitled child that he was as a child - bragging about things of which he had no involvement, lying about his fake achievements and wealth, conning and abusing women and defrauding thousands of hard working small contractors all over the country. This after buying cheap Chinese steel, using undocumented and non-union laborers and laundering hundreds of millions of $$ in his real estate shell corporations.
If Trump were a private citizen he would have been in jail a long time ago for his crimes. The SDNY and the IRS/DOJ will have a field day with his books and "Bubba" will soon be his roommate. Good riddance to this disgusting liar and criminal.
55
@RealTRUTH
Janet Yellen the former chairperson of the Federal Reserve helped steer the economy out of its 2008 Bush created Recession, yet Trump dismissed her. Powell, whom he appointed, has adhered to similar policies by keeping the interest rate relatively low. Of course, raising the interest rate too high would severely depress the housing market, which in many areas, has failed to recover sufficiently, as well as increasing the rate the government pays on its debt. Overall, Trump is completely ignorant about the function of the Federal Reserve in stabilizing the US economy.
46
@Alan J. Shaw
Of course he is following Yellen. Powell thought Janet Yellen was the smartest person in the room. I would have much preferred that Trump had kept Yellen on but he was never going to do that. Getting Powell appointed as her successor was as good as we were going to get.
6
@RealTRUTH Trump considered Ms. Yellen was too "short" for the job. At 5'3" she didn't come up to the standard Trump has for his women.
11
Thanks Janet! Maybe see you in 2 years? Keep up the good work!
12
Finally some good news for the market. 2018 has been a terrible year for stocks. I hope December will provide some relief so 401Ks owners will get some of their money back.
1
@Kris
You need to spend more time studying economics. You can take a little pain now with a slowly normalizing market with a slowly normalizing interest rate, or you can keep the party going with low interest rates and take a big hit a year or so down the road that will take you half your life to recover from.
8
Neutral level should be their only goal, along with ignoring the blowhard ignoramous that makes old people feel like it’s the 80s again.
5
I'm sure Trump's recent remarks about being disappointed in the Fed have no bearing on this latest sycophancy. Just once, I'd like the head of some government agency (yes, I know the Fed isn't such a thing, per se) to ignore the blathering of the most incurious and incompetent person to head this country.
44
So much for the independence of the Federal Reserve. Trump bullies another spineless appointee into submission.
20
Trump has been complaining a lot lately about the Fed raising the interest rate. I guess Mr Powell has paid attention.
9
Trump opened up a mouth and now Powell is giving him a Christmas present.
7
Trump will claim credit for stopping the Fed's rate hikes … of course those hikes are slowing down because the economy is showing signs of weakening, something Trump will not want to take credit for - those bad, bad DEMs, Mueller, and attacking Mexicans will be to blame.
10
This is a tough one.. I agree with quantitative easing - but how much is too much- and how fast is too fast?
For the last 2 years the Fed has raised quarterly rates to stay ahead of inflation- over all the dollar has still remained strong.
No doubt "Brexit" will strengthen the dollar even more - My gut tells me to keep interest unchanged.
Point goes to Trump on this one..
1
The Fed Chairman is confirming the economy is slowing. What won't be slowing is US debt being issued to pay to keep the government running.
I suspect that people will want to be compensated with interest to buy that debt.
10
As a long-time investor in stocks, bonds, CDs, etc., it is somewhat "laughable" that interest rates in the 2-2.25% range are considered near "neutral" in Powell's estimation. Perhaps Powell just wanted to assuage the markets as we enter holiday season. The stock market, at least for today, was happy to interpret his comments as meaning there will be a quick end to the Fed's hiking cycle. But once again, it should be kept in mind that this cycle that began 3 years ago is the slowest rate hike cycle since the 1950s. Meanwhile the Fed has barely made a dent in lessening the $4 trillion it created as part of its QE program, meaning there is still plenty of "stimulus" out there. There is a record amount of margin buying, leverage, corporate borrowing, corporate debt leveraging, etc., all of which are tremendously interest rate dependent. Powell knows this and has telegraphed his intentions over the past 10 months. Prudent savers are just beginning to get some modicum of return. So don't stop raising rates so fast. If the economy can't sustain itself with still very low rates and continued QE, then let Trump take the fall for it.
79
@marty A useful way of thinking about 2.25% rates with 2% inflation is that the real rate is 0.25%. That's awfully low by historical standards; if that is neutral then our economy is very weak.
6
@Mark A salient point. Trust it will be expeditiously integrated into the trading algorithms that control markets essentially irrespective of business related fundamentals. Todays pop was a short term sugar highlighting the whipsaw reactions triggered by rumor, speculation and greed. Sure, ever has it been thus, just nowadays at warp speed. And I do mean warp...
3
@Mark There is no way inflation is 2%. In our increasingly service economy, the costs of "services" has skyrocketed, particularly those for health insur. premiums and anything related to health care from co-pays, deductibles, prescription med. costs, etc. Rent, construction costs, decent food, tuition, etc. have also seen drastic increases in costs over the past several years. Yes, a new computer of TV is less expensive (well, maybe not with Trump's tariffs) but they're not bought on a daily or monthly basis such as food, shelter. etc. Just the other day, the 59 oz. carton of Tropicana OJ (down from 64 oz.) was now 52 oz. The cost was the same but the carton was now 11% smaller. I called Tropicana's consumer relations and was advised customers preferred a smaller carton. I replied, then why not also reduce the cost by 11%. There was no further response.
3
The long game always wins, but personally I can't stand much more of this seesaw of the markets.
Sell ! Sell !
Buy ! Buy !
America's idiotic investment casino wheel keeps hysterically spinning around.
Fortunately, the country has an experienced failed casino operator at the helm guiding us aboard the Trump Titanic.
See you all at the bottom of the Atlantic as Donald throws women and children overboard to save the first lifeboat for himself, his proud jutting chin and his ever-so-delicate ego.
129
@Socrates You should be wise enough to know that Trump has more than just one chin.