Fed increases rates a quarter point and signals a potential end to hikes

[BumRushDaShow]

Last edited Wed May 3, 2023, 03:41 PM - Edit history (1)

Source: CNBC

The Federal Reserve on Wednesday approved its 10th interest rate increase in just a little over a year and dropped a tentative hint that the current tightening cycle is at an end.

In a unanimous decision widely expected by markets, the central bank’s Federal Open Market Committee raised its benchmark borrowing rate by 0.25 percentage point. The rate sets what banks charge each other for overnight lending but feeds through to many consumer debt products such as mortgages, auto loans and credit cards. The increase takes the fed funds rate to a target range of 5%-5.25%, the highest since August 2007.

Markets, though, are more focused on whether the Fed will pause here, particularly with lingering concerns over economic growth and a banking crisis that has rattled nerves on Wall Street. Stocks rose slightly and Treasury yields were mostly lower immediately following the Fed news, but stocks struggled to hold on to the gains.

During Wednesday’s news conference, Chairman Jerome Powell said “a decision on a pause was not made today” but said the change in the statement language around future policy firming was “meaningful.”

Read more: https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html

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Article updated.

Original article -

The Federal Reserve on Wednesday approved its 10th interest rate increase in just a little over a year and dropped a tentative hint that the current tightening cycle is at an end.

In a unanimous decision widely expected by markets, the central bank’s Federal Open Market Committee raised its benchmark borrowing rate by 0.25 percentage point. The rate sets what banks charge each other for overnight lending but feeds through to many consumer debt products such as mortgages, auto loans and credit cards.

The increase takes the fed funds rate to a target range of 5%-5.25%, the highest since August 2007.
Markets, though, are more focused on where the Fed will be going from here, particularly amid concerns over economic growth and a lingering bank crisis that has rattled nerves on Wall Street.

The post-meeting statement offered only some clarity, and not by what it said but what it didn’t say. The document omitted a sentence present in the previous statement saying that “the Committee anticipates that some additional policy firming may be appropriate” for the Fed to achieve its 2% inflation goal.

[bucolic_frolic]

1. 16 months from now is September 2024

Economist David Rosenberg noted in a public email last January that the S&P bottoms on average 16 months after the pause.

That would be 2 months before Election Day 2024.

And the pause isn't here yet. Or was it just announced? We won't know until the next FOMC meeting? Or until the minutes are released in a month or two?

There's a whole industry and art of Fed watching. Is it a major in economics yet?

We are so cooked.

[BumRushDaShow]

2. There are hints now that the pause begins after today

This latest hike takes the fed funds rate to 5.08%.

[IronLionZion]

6. Recession should be mild this time

considering how strong the job market and other economic indicators are. Although the GOP House is determined to tank our economy with the debt ceiling, it shouldn't be bad enough to hurt us too much I hope.

[bucolic_frolic]

7. You may well be right, this is a different economy than ever before with remote home gigs

and side businesses. The Fed can control interest rates, but they've lost control of capital what with side cash flows of the masses and cryto and private equity and the tens of trillions the Fed minted in the last 14-20 years. FOMC is attempting to mop up excess liquidity, but they're using a sponge in the face of the water cannons of a 10 alarm fire.

[LudwigPastorius]

3. "The Committee will closely monitor incoming information and...

assess the implications for monetary policy. Additional policy firming may be appropriate to return inflation to 2 percent over time."

My God. That reads like Hemingway compared to the econo-sludge that used to issue from Alan Greenspan's mouth.

[Paper Roses]

4. These increases are killing me. I'm one of the unlucky people who fell for the Reverse Mortgage scam

The story is long for me but the net results are awful. With great plans and a good salesman, my late husband and I took out a Reverse Mortgage in 2005. Our house was paid for. We had plans to do some renovation and sell the house. Our 2 girls were out of college, without student loans. We had a small amount of savings and a minimum of stock. (now down in the gutter)

Our plans went to hell.

My husband had a stroke(he was healthy and had no medical problems that we were aware of).
He died in 2008 and since both of us were getting Social Security(I was 65, he was 72), I kept going but now had just one check but cut any spending down to minimum. Savings go quickly. He was a Vet but I was not aware that his hospital bills were covered by the VA as an emergency(too far to a VA facility) and I paid large bills for emergency care but , well you know the results.
Between hospital bills and Estate bills, savings went down significantly.
3 Months after he died, my job disappeared. The company I worked for left the state and moved to Alabama. Do you know how hard it is for a 65 year old to find a new job?

With the increases in Prime Rate this past year, the cost of this Reverse Mortgage has gone thru the roof. Now another.
I have no option but to stay in my house, the rents in my area are exorbitant. $3500.00 a month for a decent 1BR apartment? Nuts!? I'm better off here and struggling to keep up with every cost, like the rest of us.

I cannot absorb with any justification the fact that these raise in Prime Rate help anyone but the wealthy who have the $$$ and does not hurt anyone who is struggling. I cannot agree in my simple way, that these raises help the economy. It hurts the middle class and the poor. They(and I) have less to spend.. therefore, fewer sales for the companies who market any product.
Yes, I'm madder than heck and crying in my beer. I hope I live long enough and have enough equity left in my house to survive before I'm on the street. I'm sick and tired of this crap and can't do a thing about it.
Sorry to complain here but I'm alone and there is no-one else with whom I can vent. Thanks DU!

[yaesu]

5. They have been signaling for months that they want to destroy the economy. nt

[bluestarone]

8. I might be wrong, BUT

Didn't he hint last time no more rate hikes?

[BumRushDaShow]

9. I think it was the business media that mostly did that

The wobbly thought was that after the bank failures, the Fed would start to slow it down and maybe even do "a pivot" with this session. But once some of the indicators came in showing inflation still slowly going down, the GDP also slowly falling, but still-robust hiring, then it was one of those things where there was a fixation on that "5%" ( +/- ) target, and doing that "quarterback sneak" over the goal line with this increase.

This is where they were trying to go just before the pandemic hit (the rate was raised 7 times under 45 until he whined and then they paused, and then when the pandemic hit with the lockdowns, the rate was crashed right back down to near zero again).

I think they are going to watch the regional bank fallout to decide either way but I expect they might just skip an increase the next go-around.

[Bengus81]

10. They "signal" no more hike in words then do it anyway

Yeah...just like this time and then they give their banker buds another plum. Suppose that this TENTH rate hike in barely over a year will stop the endless price hikes and gouging on food?--NO. Suppose that will stop the gouging at the pump?--NO



"The Federal Reserve raised interest rates for the 10th time in just over a year — and signaled that it will stop hoisting borrowing costs as the economy slows and fears of a recession grow.

The Fed’s latest move, announced at the end of its two-day policy meeting Wednesday, brings the central bank’s benchmark interest rate to a level between 5 and 5.25 percent. Now the Fed must wait to see whether its policies can successfully tame inflation and slow the economy — or if policymakers have already gone too far."