Fed raises interest rate, signaling confidence in the economy

[DonViejo]

Source: The Washington Post



By Ana Swanson June 14 at 2:02 PM

The Federal Reserve raised its benchmark interest rate by a quarter point Wednesday, sending a message of confidence in the U.S. economy despite evidence of weaker price increases in recent months.

The increase, which will bring the Fed funds rate to between 1 percent and 1.25 percent, was highly anticipated by the markets. On Wednesday morning before the rate increase, Fed futures pointed to a 93.5 percent chance of a rate hike.

“The rate hike signals that the Fed believes the economy is improving and is going to be resilient to those hikes,” said Tara Sinclair, a professor at George Washington University and a senior fellow at jobs site Indeed.

The increase was the second rate hike this year and the third within six months. As such, consumers will begin to feel the impact of more expensive lending rates – especially those with large mortgages or those who carry credit card debt, says Greg McBride of Bankrate.com.

Read more: https://www.washingtonpost.com/news/wonk/wp/2017/06/14/fed-raises-interest-rate-signaling-confidence-in-the-economy/

[Eliot Rosewater]

1. Helps the rich, hurts everybody else.

[Wounded Bear]

2. Guess that's why my CC bill went up...

Time to get the inflation bubble machine going.

[IronLionZion]

3. The Fed may have confidence in the economy

but I don't.

Trump's going to crash everything. The recent growth is unsustainable.

in the meantime, the Fed is planning on reducing their treasury bonds, so that would lower bond prices and raise rates on treasuries. They have $4.5 trillion, and it looks like they are going to reduce by $6 billion a month and gradually speed that up until they are reducing by $30 billion a month.

""
What was unexpected was the central bank’s announcement that they have agreed to a plan to start to shrink the $4.5 trillion balance sheet.

At the moment the Fed maintains its balance sheet by reinvesting the proceeds of maturing Treasury bonds and mortgage-backed securities. To shrink the balance sheet, the Fed said it would gradually taper the amount of proceeds from maturing securities and allow some to runoff.

Under the plan, the Fed will initially allow $6 billion a month in principal from maturing Treasury securities to runoff. That will increase in steps of $6 billion each quarter over a year until it reaches $30 billion a month.

For mortgage-backed securities and agency debt, the Fed set an initial cap of $4 billion. That will increase in quarterly steps of $4 billion each quarter until it reaches $20 billion a month.
""
http://www.marketwatch.com/story/fed-raises-rates-and-sets-plan-to-shrink-balance-sheet-this-year-2017-06-14

They have to raise rates and reduce their balance sheet, because they are going to need to reverse this to stimulate the economy in a future recession after the future Trump crash. Just my $0.02

[bora13]

4. figures

just when i decided to buy. snooze/looze

[Xolodno]

5. That doesn't mean they have confidence in the economy...

....one could argue they kept the rate low to "inflate" the economy a bit from the losses of the Great Recession (why we use that term, is beyond me, it was a depression, plain and simple. Recession is for minor blips, not major).

Some areas have recovered the property value loss, others, not so much. But that may be the reality, some areas won't recover in the short run.

But this will put the squeeze even further on retailers, many of whom are imploding due to a number of reasons.

[DallasNE]

6. The Rate Is Still Insignificant

Even after this rate increase so the move is totally symbolic at this point.

There are a number of signs, in addition to weaker price increases, that will need to be watched carefully over the coming months. Hiring has slowed noticeably to where they are struggling just to keep up with population growth and the trade deficit is expanding, especially when compare to the same period last year (1st quarter). Housing starts are also soft. I would be very surprised if we are not in recession by the end of this year - and then what?

[randr]

7. Confidence my ass

Raising the rates to grab all they can before the shit hits the fan

[stevebreeze]

8. Of course higher interest rate always favors lenders over borrowers.

But since they are raising interest rate at the same time come up short in the target inflation area, they are probably raising it now so they have room to cut when the next recession, as it inevitably will, hits.

[Yupster]

9. If they want to raise rates when downturns occur, they

better raise them back up again.

You can't lower rates from zero.