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In the lead up to all these Fed meetings, I always see plenty of articles talking about why the Fed should hold rates steady (or drop). I still remember readin

• tablespoon 4y ago
  > I’ve come to associate it with an attempt to will the Fed into doing what they want. They kind of got what they wanted. IIRC, before SVB collapsed, it was widely believed the Fed was planning to hike rates by far more than they just did (IIRC, 0.75%).
  • pclmulqdq 4y ago
    I think the expected number was 0.5% before SVB collapsed, with some people betting on 0.75% on the bad inflation data.
• HDThoreaun 4y ago
  > I’ve come to associate it with an attempt to will the Fed into doing what they want. Because that's what it is. Powell tried to raise rates early in the pandmeic and wall st. meltdown successfully got him to lower them back down. It worked before so they're trying again.
  • retrocryptid 4y ago
    mmm.. I think the 2020 Taper Tantrum was a bit more complex than you're giving it credit for, but the end result was indistinguishable from the simple cause(s) you propose, so maybe it wasn't that complex.
  • tdhoot 4y ago
    When did Powell try and raise rates early in the pandemic? You might have your timelines confused, it was well before the pandemic.
• laweijfmvo 4y ago
  I've tried so many times to bet ("invest") on what the Fed "should do" and been wrong that I'm not believing it again. Interest rates to 0 in 1 year.
• themitigating 4y ago
  Why would the fed care what people want them to do?
  • laweijfmvo 4y ago
    Because they're human and humans are weak. The "right thing" involves a lot of pain for a lot of people. OR, they can attempt to kick th can further down the road, be a hero, and let the next Board deal with it.
  • AnimalMuppet 4y ago
    They shouldn't. Doing what people don't want is kind of the Fed's job.
    • chasd00 4y ago
      yeah the phrase "the fed takes away the punch bowl right when the party is getting good" has been around for a long time.
  • newaccount2023 4y ago
    [dead]
• noelsusman 4y ago
  I don't think the Fed cares about pundits or random CEOs. They'll keep going until inflation comes down.
  • retrocryptid 4y ago
    "The beatings will continue until morale improves."
• ambientenv 4y ago
  I think the substack article linked here [0] is pretty good at addressing what you need to know. It used to be that money - capital - was used for value creation like a better product or service or some public good in the commons. Now the most crucial use of capital is to generate (further) wealth for those already wealthy. And since "conventional wisdom" of the economics kind blames higher wages as an impetus for inflation, "hurting" those wage earners is the key via higher rates to reign in said inflation. But real wages are and have been falling. Thus, because the economy is biased towards enabling and sustaining the making of money with money, in other words continuing to generate and increase wealth for the wealthy at the expense of others, the system will continue to reward the needs and wants of the wealthy. Just my take on things. I'm learning as we go. [0] https://news.ycombinator.com/item?id=35260210 https://news.ycombinator.com/item?id=35260210
  • tppiotrowski 4y ago
    I agree with this take. Being a builder does not generate predictable returns like an index fund or the S&P over the last 100 years. They tell you in school that you should invest money early and watch it accrue, but if we all do that collectively as a society then who is going to build.
    • webinvest 4y ago
      When valuations are high, companies IPO, founders cash out and hopefully go on start new companies. People on the street buy companies for 3x their annual earnings but the stock market regularly buys companies for 8x, 20x, even 80x their annual earnings. This is expressed in each stock’s P/E ratio.
    • ericmay 4y ago
      > Being a builder does not generate predictable returns like an index fund or the S&P over the last 100 years. Sure but investing a modest sum in the S&P 500 as a wage earner, salary earner, or otherwise also requires you to work for someone else your whole life and never get wealthy. That incentive kesp people starting new companies and doing other things - i.e. taking risks.
    • 4y ago
• retrocryptid 4y ago
  A couple weeks back as the SVB story was breaking, someone here on HN said (and I paraphrase): "okay. that's it. there's no way the fed will raise rates now that they're destroying the banks." And I was thinking... "I'm not sure 'destroying the banks' is a metric the fed tracks. Unemployment and inflation are." But the earnestness with which the comment was offered. It was, as you say, like the commenter was willing the fed to do what they wanted. I guess magical realism isn't just a literary genre.
  • chrisco255 4y ago
    The Fed is the central bank. Its primary purpose has always been to be the lender of last resort and provide liquidity to the banking system. Of course they track the health of the banking system. https://en.wikipedia.org/wiki/Lender_of_last_resort https://en.wikipedia.org/wiki/Lender_of_last_resort It's often stated that their two goals are to maximize unemployment and minimize inflation, but those are ultimately secondary to maintaining the overall health of the banking system and financial sector (although it's generally thought that aiming for those two goals help achieve that stability).
    • ericpauley 4y ago
      The causality arguably goes the other way. Banking stability is instrumental to maximum employment and price stability.
  • deleted 4y ago
    [deleted]
  • tdullien 4y ago
    So there is a strong argument that the construct the Fed chose for the SVB depositor bailout was very much designed to give them free hand to continue rate hikes.
  • kneebonian 4y ago
    > And I was thinking... "I'm not sure 'destroying the banks' is a metric the fed tracks. Unemployment and inflation are." It's interesting you say that. Putting on my tinfoil hat for a second. People who have been making their fortunes on easy access to capital, VCs and the tech sector, are now mad that the rates are going up and it is starting to kill their golden gooses. Since the fed isn't listening to them they are going to force the Fed to listen to them by laying people off to increase unemployement and will continue to do so until the Fed relents to their demands.
• paganel 4y ago
  > The Fed won’t stop until rich people stop asking them to stop. I think the most negatively affected by these rises is going to be the US middle-class, i.e. the people who have to pay mortgages (the same goes for the middle-classes based in Western countries more generally speaking). Higher interest rates means higher mortgage rates, and taking into consideration that those mortgages were signed when the effective rate was close to zero we're talking about a devastating effect on those people's finances. Of course, VCs and capitalists somehow also negatively affected by these rises will have the louder voices, they're the ones controlling the discourse.
  • cableshaft 4y ago
    > taking into consideration that those mortgages were signed when the effective rate was close to zero Most mortgages rates are locked in when you buy the house (unless you get an adjustable-rate mortgage, which is only about 9% of applications in the US as of September 2022)[1]. Like my mortgage payment hasn't changed hardly at all since I got it 5 years ago (it went up $100 because I have a PMI, but that's it, and that predated any rate increases). What it's actually caused is it's kind of locked millions of people into their existing mortgages, because they got in while rates were so low, they don't want to buy a new home at the much higher rates (especially considering home prices are still super inflated over the past couple of years), so they're kind of stuck. We kind of wanted to move but didn't buy a new home fast enough during the pandemic (we were looking late 2021, but didn't pull the trigger), so now it just doesn't make sense, the new rates would almost double our current mortgage payments, especially considering we'd have to buy a house at about +50% of our original purchasing cost. Selling our also inflated home will help towards that a bit, but not enough. So now we can't really afford to move, even though we'd like to. [1]: https://www.rocketmortgage.com/learn/40-percent-of-americans-adjustable-rate-mortgage https://www.rocketmortgage.com/learn/40-percent-of-americans...
    • klipklop 4y ago
      Yup. As long as this crowd can keep making their mortgage payments they will never really be motivated to sell and move into a larger home. This will keep inventory low on what used to be called "starter" homes for likely the rest of this (millennial) generation in most US metro areas. If you could not buy into an expensive market then, you likely never will barring some huge windfall like doubling your salary or inheritance. Guessing most of Gen Y will be renting condo's or living with their parents until the homes are passed on to them. A dumpy 3/2 1400-1600 sq ft. in the south bay area is like $8000+/mo with taxes and $360,000 down payment. Good luck.
• elhudy 4y ago
  Somewhat related to weather articles commenting on interest rates, I found it was fascinating that in Powell's opening statement he blamed the rise of consumer spending partially on the weather. >Consumer spending appears to have picked up this quarter, although some of that strength may reflect the effects of swings in the weather across the turn of the year. I'm not proficient enough in monetary and fiscal policy to comment on the accuracy of drawing that conclusion, but I found it hysterical nonetheless. https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230322.pdf https://www.federalreserve.gov/mediacenter/files/FOMCprescon...
  • TylerE 4y ago
    Seems logical enough to me. It has, at least in my part of the country, been the most mild winter in my memory. We hit the 70s the majority of the days in February, with overnight lows in the 50s. I'm in North Carolina, not Florida! We're supposed to have mild winters, but this year, other than that one weekend where much of the south saw negative temperatures... it's like we skipped right from fall to spring. I've barely even worn long pants. Nice weather leads to more travel, outdoor activity, more shopping, more going to restaurants. If it's cold and rainy, you stay home more.
    • aidenn0 4y ago
      I'm in Southern California, and my parents visited from Virginia this February. It was rainy with highs in upper 50s lower 60s. Meanwhile it was 78 back in VA...
• wolverine876 4y ago
  > I’m wondering if the Fed is just going to keep doing it until everyone is resigned to continued increases. In a way, that's the idea. Inflation is a psychological phenomenon. People raise prices, etc. because they expect inflation. The Fed needs to keep raising rates until people expect that the Fed will continue to raise rates until prices stabilize (if that sentence makes sense).
• evancox100 4y ago
  You're actually onto something, I think. Half of the fed's job is setting interest rates, but the other half is setting interest rate _expectations_. If people expect rates to hold steady or decrease, they may not change their behavior (e.g. slow hiring or spending) to the extent needed to reduce inflation. But if they do expect rates to stay high or go higher, then they will act on those expectations, and the effects will ripple through the economy. And yes, it is by and large "rich people" the fed needs to convince, specifically business and capital owners.