3 ms·

The Fed is projecting rate cuts next year. As of March 22nd, the Fed is projecting a federal funds rate of 4.3 in 2024 and 3.1 in 2025, with 2.5 in the “longer

by rcme 4y ago

The Fed is projecting rate cuts next year. As of March 22nd, the Fed is projecting a federal funds rate of 4.3 in 2024 and 3.1 in 2025, with 2.5 in the “longer run”. Hard to say the Fed won’t cut rates when their own projections have them cutting rates.

mullingitover 4y ago
They were also projecting rates would be low before they suddenly weren't. If the Fed projections were reliable, banks wouldn't be in this situation.
- JumpCrisscross 4y ago
  > Fed projections were reliable, banks wouldn't be in this situation SVB didn't do anything to hedge its duration even well after the "inflation is transitory" period was over.
- rcme 4y ago
  My point was more that the Fed wants to keep rates as low as possible. The person I was responding to was implying the Fed would choose not to lower rates even if they could to avoid “bailing out” the banks.
  - TinyRick 4y ago
    Why does the Fed want to keep rates as low as possible? Their mandates are to provide price stability and maximize employment, not keep rates as low as possible. Unemployment is very low so they are doing well in terms of maximizing employment, but inflation is still running hot, so the logical thing for them to do is keep rates high enough to stave off continued inflationary pressures.
    - rcme 4y ago
      The Fed wants to keep rates as low as possible because their mandate is to keep inflation at 2% and maximize employment. If inflation is at or under 2%, then lowering rates will increase economic activity and increased economic activity will reduce unemployment.
      - nostrademons 4y ago
        The unemployment rate is now 3.6%, about the lowest it's ever been. Where are these workers going to come from? The Fed has been very explicit that they need to tighten labor market conditions. "Tighten labor market conditions" = "cause layoffs". That's how it works, they just can't say it out loud because it'll spook people. They can't bring down inflation until they raise rates high enough that companies start going under, and they have no incentive to lower rates unless actual bad things are happening in the real economy. (Remember also that when rates are high, the Fed has more room to cut when actual bad things do happen, because there's a floor at zero.)
    - TinyRick 4y ago
      I can't reply to your most recent comment rcme, but it sounds like you are agreeing with me? Yes, if inflation is at 2% then the Fed would be incentivized to reduce rates, but....it's not, it's over 5% and has been for some time.
      - rcme 4y ago
        Yes, but they want to lower rates, they just can't :)
deleted 4y ago
[deleted]

by rcme 4y ago

mullingitover 4y ago

They were also projecting rates would be low before they suddenly weren't. If the Fed projections were reliable, banks wouldn't be in this situation.

JumpCrisscross 4y ago
> Fed projections were reliable, banks wouldn't be in this situation SVB didn't do anything to hedge its duration even well after the "inflation is transitory" period was over.
rcme 4y ago
My point was more that the Fed wants to keep rates as low as possible. The person I was responding to was implying the Fed would choose not to lower rates even if they could to avoid “bailing out” the banks.
- TinyRick 4y ago
  Why does the Fed want to keep rates as low as possible? Their mandates are to provide price stability and maximize employment, not keep rates as low as possible. Unemployment is very low so they are doing well in terms of maximizing employment, but inflation is still running hot, so the logical thing for them to do is keep rates high enough to stave off continued inflationary pressures.
  - rcme 4y ago
    The Fed wants to keep rates as low as possible because their mandate is to keep inflation at 2% and maximize employment. If inflation is at or under 2%, then lowering rates will increase economic activity and increased economic activity will reduce unemployment.
    - nostrademons 4y ago
      The unemployment rate is now 3.6%, about the lowest it's ever been. Where are these workers going to come from? The Fed has been very explicit that they need to tighten labor market conditions. "Tighten labor market conditions" = "cause layoffs". That's how it works, they just can't say it out loud because it'll spook people. They can't bring down inflation until they raise rates high enough that companies start going under, and they have no incentive to lower rates unless actual bad things are happening in the real economy. (Remember also that when rates are high, the Fed has more room to cut when actual bad things do happen, because there's a floor at zero.)
  - TinyRick 4y ago
    I can't reply to your most recent comment rcme, but it sounds like you are agreeing with me? Yes, if inflation is at 2% then the Fed would be incentivized to reduce rates, but....it's not, it's over 5% and has been for some time.
    - rcme 4y ago
      Yes, but they want to lower rates, they just can't :)

deleted 4y ago

[deleted]