Tiny
Senior Associate
Joined: Dec 29, 2010 21:22:34 GMT -5
Posts: 13,357
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Post by Tiny on Jul 29, 2019 14:43:40 GMT -5
Conventional Wisdom: The federal funds rate is a monetary policy tool used to achieve the Fed's goals of price stability (low inflation) and sustainable economic growth. ... On the other hand, when there is too much growth the Fed raises interest rates. How Interest Rate Cuts Affect Consumers - Investopedia www.investopedia.com/articles/economics/.../interest-rate-affecting-consumers.aspShouldn't the Fed be holding the rate steady? Who are the winners if the Fed cuts the rate?
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souldoubt
Senior Member
Joined: Jan 4, 2011 11:57:14 GMT -5
Posts: 2,745
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Post by souldoubt on Jul 29, 2019 14:52:47 GMT -5
I would think under the current conditions you could make the case for raising or holding steady but not lowering the rates. Then again usually when the economy is doing well you would think that's a good time to not run deficits.
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Deleted
Joined: Mar 28, 2024 16:11:42 GMT -5
Posts: 0
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Post by Deleted on Jul 29, 2019 17:38:50 GMT -5
Trying to keep the yield curve from going negative, that has successfully predict almost all the past recessions. (https://fred.stlouisfed.org/series/T10Y2Y click on the max scale to really see what i'm talking about as each recession will show up).
That along with other economic conditions signal the action (lower than expected inflation, slowing corporate earnings, etc.).
Finally, the political pressure. Next year is an election year and both parties don't want to debate over Trump's economy with a Fed policy that could be blamed. So best is if they can just have it hold flat or grow the economy some. Both parties actually need inflation to solve the budget problems of the country. If the Fed raises rates and the economy tanks, Trump will twitter them as he told them so (already has picked on the Fed on twitter as raising them to fast). Democrats want to hit Trump on how his tarriffs have failed to create the lower class jobs, etc., that won't market well if we go into a recession where Trump can point at the Fed (markets great when unemployment is 3% and companies are still offshoring). So each party strategically is planning for the election cycle and pressuring the Fed. THIS IS NOT MEANT TO BE POLITICAL, just stating both sides are pushing for the same thing for very different reasons, but likely why we are seeing the "strange" policy.
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