6 ms·

They did the absolute minimum to appear to be able to say they are dong something. With official inflation nearing 8%, this is nowhere near enough. SO far equit

They did the absolute minimum to appear to be able to say they are dong something. With official inflation nearing 8%, this is nowhere near enough. SO far equity markets agree this is effectively nothing

hgomersall 5y ago
It's only nowhere near enough if you view the process as something other than a huge charade. Take a look at the predicted inflation to see how little the monetary policy "experts" have a clue.
chipgap98 5y ago
Isn't this the first of many hikes planned for 2022?
standardUser 5y ago
The Fed said to expect up to 7 increases this year.
- czbond 5y ago
  And no one believes them. The bond market is doing the rate cuts for them.
  - boppo1 5y ago
    > The bond market is doing the rate cuts for them. Can you elaborate? I don't understand.
    - MatteoFrigo 5y ago
      I am not the person you are replying to, but perhaps the cleanest indication of what "the bond market" "thinks" is to look at the Eurodollar futures quotes at https://www.cmegroup.com/markets/interest-rates/stirs/eurodollar.quotes.html https://www.cmegroup.com/markets/interest-rates/stirs/eurodo... It is hard to define exactly what a "Eurodollar" is, but for now assume that a Eurodollar is a bank deposit in a jurisdiction not subject to the Fed's authority. ("Eurodollar" has nothing to do with Euro the currency. People are surprised that "dollars" exist outside the authority of the Fed.) A Eurodollar future is a contract to borrow a "Eurodollar" for typically 3 months some time in the future. The price of the future is quoted as (100 - interest rate). For example, the Sep 2023 contract (called GEU3) is currently priced at 97.225, meaning that people are agreeing to lend money for 3 months in Sep 2023 at a 2.775% interest rate. Now to my point: the Eurodollar futures curve is currently inverted starting in Sep 2023. For example, the price of the GEU4 future (Sep 2024) is 97.50, implying a 2.50% interest rate, or a rate cut in GP's parlance relatively to Sep 2023. Why would you pay attention to Eurodollar futures? For one thing, the notional value of all futures is about $12T. (This market used to be larger than the Treasury bond market until Congress fixed the problem.) Like all markets, it may be right or wrong, but if you strongly believe that rates will not be cut between 2023 and 2024, there is a ton of money to be made in that market. The curve started getting nervous, with small inversions of 1-4 basis points, in December 2021, and the inversion has grown larger since. The inversion peak-to-through was ~30bp yesterday and is ~40bp after the Fed's announcement today.
      - ragnot 5y ago
        Thank you for this. I learned something new today. Any books/websites you could recommend to learn more about this sort of stuff?
        MatteoFrigo 5y ago
        Good question. Those who understand this stuff (not me) are busy making money and don't write about it. Nevertheless, I think that these papers [1,2] by Pozsar offer a fabulous overview of the contemporary money market. [1] https://www.financialresearch.gov/working-papers/files/OFRwp2014-04_Pozsar_ShadowBankingTheMoneyView.pdf https://www.financialresearch.gov/working-papers/files/OFRwp... [2] https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr458.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...
      - boppo1 5y ago
        >used to be larger than the Treasury bond market until Congress fixed the problem I remember hearing about that. How did they pull that off?
- jcadam 5y ago
  As soon as the economy starts really sputtering, they'll reverse course.
nine_zeros 5y ago
They need to go slow. An abrupt rate increase will cause a recession.
- bequanna 5y ago
  Could they go any slower? The consensus seems to be that this is far too little way too late.
  - chipgap98 5y ago
    Consensus from who?
    - bequanna 5y ago
      Every person in the US who has had their purchasing power destroyed over the past ~18 months. Unfortunately, most people were/are too drunk on (maybe temporary) housing and stock market gains to care. Cheap money, free money and rampant speculation could all have easily been cut off a year ago and we would have had a much “softer landing”. Now we’re in a much more precarious position and may end up fighting stagflation possibly causing years long general economic malaise. …but hey, Zillow said my house is worth $XXX!!!
      - colinmhayes 5y ago
        > Every person in the US who has had their purchasing power destroyed over the past ~18 months. The vast majority of people in the US have no idea what the fed is. Why would you trust their judgement?
      - Loughla 5y ago
        I legitimately want my home value to tank. I'm sick of paying taxes on a 275k home value that will never, ever, ever sell for that much. I wish it could go back to 80-100k, regardless of whatever "equity" that costs me. I'm in my permanent home, not an investment property.
- phkahler 5y ago
deleted 5y ago
[deleted]
zthrowaway 5y ago
They’ll get more aggressive with it after the midterms.

hgomersall 5y ago

It's only nowhere near enough if you view the process as something other than a huge charade. Take a look at the predicted inflation to see how little the monetary policy "experts" have a clue.

chipgap98 5y ago

Isn't this the first of many hikes planned for 2022?

standardUser 5y ago

The Fed said to expect up to 7 increases this year.

czbond 5y ago
And no one believes them. The bond market is doing the rate cuts for them.
- boppo1 5y ago
  > The bond market is doing the rate cuts for them. Can you elaborate? I don't understand.
  - MatteoFrigo 5y ago
    I am not the person you are replying to, but perhaps the cleanest indication of what "the bond market" "thinks" is to look at the Eurodollar futures quotes at https://www.cmegroup.com/markets/interest-rates/stirs/eurodollar.quotes.html https://www.cmegroup.com/markets/interest-rates/stirs/eurodo... It is hard to define exactly what a "Eurodollar" is, but for now assume that a Eurodollar is a bank deposit in a jurisdiction not subject to the Fed's authority. ("Eurodollar" has nothing to do with Euro the currency. People are surprised that "dollars" exist outside the authority of the Fed.) A Eurodollar future is a contract to borrow a "Eurodollar" for typically 3 months some time in the future. The price of the future is quoted as (100 - interest rate). For example, the Sep 2023 contract (called GEU3) is currently priced at 97.225, meaning that people are agreeing to lend money for 3 months in Sep 2023 at a 2.775% interest rate. Now to my point: the Eurodollar futures curve is currently inverted starting in Sep 2023. For example, the price of the GEU4 future (Sep 2024) is 97.50, implying a 2.50% interest rate, or a rate cut in GP's parlance relatively to Sep 2023. Why would you pay attention to Eurodollar futures? For one thing, the notional value of all futures is about $12T. (This market used to be larger than the Treasury bond market until Congress fixed the problem.) Like all markets, it may be right or wrong, but if you strongly believe that rates will not be cut between 2023 and 2024, there is a ton of money to be made in that market. The curve started getting nervous, with small inversions of 1-4 basis points, in December 2021, and the inversion has grown larger since. The inversion peak-to-through was ~30bp yesterday and is ~40bp after the Fed's announcement today.
    - ragnot 5y ago
      Thank you for this. I learned something new today. Any books/websites you could recommend to learn more about this sort of stuff?
      - MatteoFrigo 5y ago
        Good question. Those who understand this stuff (not me) are busy making money and don't write about it. Nevertheless, I think that these papers [1,2] by Pozsar offer a fabulous overview of the contemporary money market. [1] https://www.financialresearch.gov/working-papers/files/OFRwp2014-04_Pozsar_ShadowBankingTheMoneyView.pdf https://www.financialresearch.gov/working-papers/files/OFRwp... [2] https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr458.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...
    - boppo1 5y ago
      >used to be larger than the Treasury bond market until Congress fixed the problem I remember hearing about that. How did they pull that off?
jcadam 5y ago
As soon as the economy starts really sputtering, they'll reverse course.

nine_zeros 5y ago

They need to go slow. An abrupt rate increase will cause a recession.

bequanna 5y ago
Could they go any slower? The consensus seems to be that this is far too little way too late.
- chipgap98 5y ago
  Consensus from who?
  - bequanna 5y ago
    Every person in the US who has had their purchasing power destroyed over the past ~18 months. Unfortunately, most people were/are too drunk on (maybe temporary) housing and stock market gains to care. Cheap money, free money and rampant speculation could all have easily been cut off a year ago and we would have had a much “softer landing”. Now we’re in a much more precarious position and may end up fighting stagflation possibly causing years long general economic malaise. …but hey, Zillow said my house is worth $XXX!!!
    - colinmhayes 5y ago
      > Every person in the US who has had their purchasing power destroyed over the past ~18 months. The vast majority of people in the US have no idea what the fed is. Why would you trust their judgement?
    - Loughla 5y ago
      I legitimately want my home value to tank. I'm sick of paying taxes on a 275k home value that will never, ever, ever sell for that much. I wish it could go back to 80-100k, regardless of whatever "equity" that costs me. I'm in my permanent home, not an investment property.
phkahler 5y ago

deleted 5y ago

[deleted]

zthrowaway 5y ago

They’ll get more aggressive with it after the midterms.