Fed Reduces Interest Rate
 

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.

Opposite of why they raise the rate……..
See, you can get gobbledygook right here.🤦

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.

Afraid of a recession starting now

Response Time
 

I think the response time was a little slow. The cut was just right. It would have been a quarter if they were more certain of a recession was not coming. The economy is like a big ship, it takes a while to turn.

former finance guy to the rescue.

1) The current rates of inflation have trended down and is close or the core is at or below the fed's target rate of 2%. Primary goal accomplished! :highfive:

2) the labor market is much weaker than the headline numbers show. Why is that statement appear to be true? Because the annual true up adjustment was down about 700,000 jobs or so, which is about 70K per month overstated Likewise the month following the monthly inithialreading, true up adjustments are all negative / down as well. So for what every reporting source is being used for the initial monthly reading, is toohigh, and so the market is weaker in reality, than the BLS is portraying

3) The Sahm rule is right at the labor recession threshold, meaning that any further weakness in the labor market is signal a recession is imminent.

4) Powell is a being a bit more political than he would ever admit, but if there was ever a time to avoid any labor recessions or numbers or indicators showing that a recession is imminent, now is the time to reduce rates to avoid any negative economic press prior to the election.

Does that work for you?

You forgot to add that it pushes more money into the pyramid scheme (stock market) so it will look healthy and people will think they're getting rich.

I say people invested in CD's should pull all their money out of the financial institutions where people enjoy the use of their "free money" and see how long the stock market lasts. What a joke the whole thing is! :mornincoffee:

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


The Fed does not operate in a vacuum. There are 19 people on the committee and 12 of them get to vote. 11 of the 12 voted for the half point cut. The other one wanted a quarter point cut. But all agreed the time has come to cut and cut again.

The economy is not a horror like some are being led to believe. We are in recovery. Be glad.

This So Sad, Too Bad routine I have seen from those who have been rooting for a recession makes no sense to me. I must assume they have been dysinformed.

I accept the fact that my money market is going to take a hit, but I don't think we will have to return to nothing. I think this rate cut is going to drive the economy in an even more positive direction -- so I can give up something to get something. I hope to see 5% mortgages so the housing market can normalize and first time buyers can have a chance and corporate landlords won't have really cheap money to use to hog all the starter homes and gouge renters. That would be good for the economy on so many levels. Interest rates have been obscenely low for a lot of this century. Maybe, just maybe, we are on our way to normal.

Boomer

Some are overlooking the fact in home pricing that this inflation created higher wages and very expensive building materials. If they believe that an interest adjustment will save the world, they should stay tuned.

None of this makes sense to me. To me, debt does not create wealth, the lack of debt creates wealth. I have done very well by staying out of debt. Interest rates should be controlled by the market based on supply and demand, not by the Government.

I would imagine many young families, struggling their way up the ladder of life, will be more than happy to see a rate reduction.
The oldies, still fighting to be the richest people in the cemetery, not so happy.:ho:

it's all physcological it does very little over all except for that. It's unfortunate they don't discuss the other methods they have.

Maybe a reduction in job postings has them concerned. They were too slow in raising and now may be too fast in cutting.

Remember when they kept saying that inflation was "transitory".

Increasing interest rate is usually put in place to slow the economy and slow down inflation.
A segment of the public has an excess of money and production cannot keep up with the demand.
The pandemic was the perfect example of this and put us in the situation where inflation ruled the day.
Now there are signs that the demand for employment has slowed, and manufacturing has increased, whether within our boarders or not.
So, by decreasing the interest rate it helps with spending and investment.
The hold thing is a balancing act.
And other than some tax incentives government has very little to do with where the economy is today or tomorrow.
What drive this are the average American. What they want and when they want it and are the products there to meet their demand.

Don't be fooled by the spin. Sure, 2.5% inflation is better than 8%, but let's be careful calling it a win. This is on top of the cumulative high inflation rates over the past 3 years. Don't kid yourself...you feel it with every trip to the grocery store, the gas station, your favorite restaurant, etc.

Yes, the operation was a success...but the patient died.