[Moderator]

NO POLITICAL REFERENCES ARE ALLOWED ON THE WEBSITE.

VIOLATION OF THESE RULES CAN LEAD TO ACCOUNT TERMINATION AND BAN.

Just to be clear, blaming anything on the election is political.

Keep the comments directed to the economics.

[Aces4]

Originally Posted by Bill14564

Inflation is not running at 9% any longer and appears to be decreasing below 3%. What is *your* definition of "under control?"

As far as food, clothing, and other basics go, simply find the CPI number that includes those.

That is so funny! Prices won't retract to pre-inflation levels and inflation is still going on even if it's lower now.

A good analogy is a fire ripping through one's home, leaving ashes before the local fire department can extinguish all the flames. The fire department finishes and hands the burned off door knob to the owner and says, there you go, it's safe now with no more fire. Enjoy your evening at home.

[Aces4]

Originally Posted by Bill14564

BLS statistics say 2.1% in August.

- That is across the country and may vary in a particular area

- That is an average and may vary depending on what you normally buy

My cumulative food expenditures this year, including dining out, are very close to what they were last year. The difference appears to be under 2%.

What's for dinner every night, the MacDonald's $5. bargain meal?

[Bill14564]

Originally Posted by Aces4

That is so funny! Prices won't retract to pre-inflation levels and inflation is still going on even if it's lower now.

A good analogy is a fire ripping through one's home, leaving ashes before the local fire department can extinguish all the flames. The fire department finishes and hands the burned off door knob to the owner and says, there you go, it's safe now with no more fire. Enjoy your evening at home.

So you don't understand what inflation is and what it means to have inflation under control.

[Aces4]

Originally Posted by Bill14564

So you don't understand what inflation is and what it means to have inflation under control.

That's right, I don't understand by today's standards. I'm old school and follow that methodology for correct, stricter, more exact measurements of inflation and recovery. I know I am supposed to allow for fudging...

[Caymus]

I see many articles about how people are having trouble paying household expenses. Does cutting rates reduce or increase normal living expenses?

https://www.msn.com/en-us/money/mark...b144249&ei=154

[Bhighley]

Originally Posted by retiredguy123

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

Good thing you came to this forum for straight answers and no gobldygook!

[bark4me]

Originally Posted by tophcfa

that’s an easy one to answer. Our country, both government and most citizens, are up to their eyeballs in debt. Debt is like crack, and lower rates is like getting the needed crack fix at a much cheaper price. And just like with crack, too much debt never ends well. All the gobbledygook is just a smokescreen because nobody wants to address the real underlying problem.

All the news outlets are giddy about how the lower rates will help everyone in debt, but there is no mention about how it hurts senior citizens who need to earn a reasonable interest rate on their savings to supplement their social security and keep up with inflation.

👏 👏 👏 👏 👏 👏 👏 👏 👏

[Altavia]

///

[Bill14564]

If you are not going to read through the thread then for your own sake at least look at post #62.

[Altavia]

A perspective from Neil Gilfedder, Executive Vice President of Investment Management and Chief Investment Officer, Edelman Financial Engines, LLC

On Wednesday of this week, the Federal Reserve made a long-awaited decision to start cutting interest rates. I wanted to share with you what we think about this and how we are stewarding your investments.

First, let’s cover the facts. The Fed has kept its target “Fed funds rate” at the same level since it paused its rate increases in July 2023 in its fight against inflation. This week’s decision marks an assessment by the Fed that inflation is largely under control. So far, we’ve managed to avoid falling into recession, and lower interest rates should help lower that risk. The Fed’s decision to implement a half-percent reduction signals a strong conviction, in contrast to what could have been a more modest 0.25% change.

There are two remaining Fed meetings this year, in November and December. It is widely expected that more cuts totaling a further half- to full-percentage point reduction are coming by the end of the year, but there’s no guarantee. Expectations have changed a lot over 2024, with news about inflation and the economy painting an unclear picture. The speed and magnitude of further cuts will depend on how inflation and economic growth continue to evolve.

So, what does this mean for the bond and stock market outlook, and what are we doing to look after your investments?

First, keep in mind that the Fed only controls short-term interest rates. By way of contrast, looking at the five-year Treasury yield shows the rate was trending down even before this week’s decision (from about 4.7% in April down to below 3.5% in September). This shows that bond investments are driven by factors other than just Fed decisions, such as inflation, recession risk, global events, the election and other factors. The same is true for stock markets.

The lengthy list of potential market-moving events means there will surely be some surprises in the coming months. We do expect interest rates to continue to fall, which will help mitigate what bonds have experienced in the last couple of years. That’s why for portfolios invested for long-term growth, we recommend a portion be invested in bonds. Some parts of the bond market may move faster than others, so we aim to hold a diverse mix of bonds, comprising different issuers (Treasurys, corporates and mortgage-backed) and different maturity exposures (short, intermediate and long-term).

Bonds of varying types offer different potential rewards for taking on risk, and they usually belong in a well-diversified portfolio along with stocks.

We’re maintaining our disciplined approach of sticking with portfolio strategies designed for long-term growth at a risk level suitable for you. That means not being tempted to try to outguess exactly when interest rates are going to move or making a big bet on whether a recession happens.

Falling interest rates may have other impacts on your household finances, whether it’s due to falling CD yields or lower mortgage rates.

If you have a pension and are considering retiring soon, lower interest rates could have some impact on the value of lump sum pension payouts. Now may be a good time to review your pension options and talk with your planner about your retirement goals.

...

[jimjamuser]

Originally Posted by Caymus

I see many articles about how people are having trouble paying household expenses. Does cutting rates reduce or increase normal living expenses?

https://www.msn.com/en-us/money/mark...b144249&ei=154

It reduces the RATE of increase. Over time the cost of everything (goods and labor) goes up. When I got out of high school, I bought a nicely running used car for $60. That is about what you would pay today for a used bicycle. I believe that over time the price inflation averages out to around 3% per year. Each year the price of anything goes up about 3%.
........Think of it this way, in 1950 a penny was a USEFUL currency, not TODAY.

[Aces4]

Originally Posted by jimjamuser

It reduces the RATE of increase. Over time the cost of everything (goods and labor) goes up. When I got out of high school, I bought a nicely running used car for $60. That is about what you would pay today for a used bicycle. I believe that over time the price inflation averages out to around 3% per year. Each year the price of anything goes up about 3%.
........Think of it this way, in 1950 a penny was a USEFUL currency, not TODAY.

Think of it this way, when you got out of high school there was a correlation between wages and costs. That has been totally skewed in the year 2024.

[jimjamuser]

Originally Posted by Aces4

Think of it this way, when you got out of high school there was a correlation between wages and costs. That has been totally skewed in the year 2024.

There is a double correlation between wages and costs. This is called the wage SPIRAL. As wages go UP prices for goods goes UP. But, as prices go UP that INCREASES demand for wages to go UP.
......Compared to other advanced economies the US in 2023 had STRONGER GDP and the lowest inflation.In general , after Covid people talk about the US recovering better than Europe.
.......Adjusted for inflation the 2024 minimum wage is 40% LOWER than the 1970 minimum wage. My OPINION ......is that was caused by greedy outsourcing to China.

[jimjamuser]

Originally Posted by Aces4

That is so funny! Prices won't retract to pre-inflation levels and inflation is still going on even if it's lower now.

A good analogy is a fire ripping through one's home, leaving ashes before the local fire department can extinguish all the flames. The fire department finishes and hands the burned off door knob to the owner and says, there you go, it's safe now with no more fire. Enjoy your evening at home.

Prices won't RETRACT. Historically they go up 3% each year. The FED has just reduced the BORROWING rate by 1/2 of a percent. They initially raised the RATE to keep prices from going up (say 7%) now they are satisfied that PRICES have STOPPED going up. Now they hope that PRICES will go back to about a 3% rise. So, they reduce the BORROWING rate by 1/2 of a percent.
.........The FEDS purpose is to prevent a wild price SPIRAL that gets out of control.