I genuinely don't understand these rate hikes

[Anonymous]

Can somebody explain to me why the Fed is raising rates? Inflation right now is due to supply chain and energy (geopolitical) issues, not cheap money -- raising rates won't make my groceries or gas cheaper. The housing demand is still there. The job market is strong. What is the thinking here?

[Anonymous]

Simple answer? It’s necessary to tame inflation. The gov gave out too much “free” money during COVID, and so now has to increase borrowing costs significantly in order to calm things down. And it’s not over — there like will be three more big rate hikes this year alone. The result? Housing is going to crash big time. New mortgages are already at a 20+ year low, and no one is going to give up their 2% rate to buy a new home at 7% or more. But for those with cash, next year will be a great time to buy!

[Anonymous]

Anonymous wrote:Can somebody explain to me why the Fed is raising rates? Inflation right now is due to supply chain and energy (geopolitical) issues, not cheap money -- raising rates won't make my groceries or gas cheaper. The housing demand is still there. The job market is strong. What is the thinking here?

It's both. As the PP pointed out, a lot of liquidity was introduced into the system that needs to be sucked out. Hence the rate hikes. This will not necessarily eliminate supply-based inflation but will likely tame it a bit.

The Fed funds rate is now 2.25% (pre pandemic it was 2%). Another 1.5% (a couple more 75bp hikes) takes it up to 3.75%. Not bad at all. Wouldn't it be awesome if rates are at 3.75 or even 4.5% but employment and wage growth continue as they are now?

[Anonymous]

How do you not understand multiple-trillion dollars stimuli + expansion of money supply by almost double + a bloated Fed balance sheet that grew to the size of $9,000,000,000,000?

Put down the CNN/partisan talking points and look at the common sense numbers. Maybe, just maybe there was too much money, liquidity, and access to easy money in the system? Supply is out of whack not only due to supply side issues, but also because demand is so strong even in the face of those supply side issues due to far too much money in the system.

You thought those multiple rounds of trillion dollar plus stimuli had no consequences?

[Anonymous]

Anonymous wrote:How do you not understand multiple-trillion dollars stimuli + expansion of money supply by almost double + a bloated Fed balance sheet that grew to the size of $9,000,000,000,000?

Put down the CNN/partisan talking points and look at the common sense numbers. Maybe, just maybe there was too much money, liquidity, and access to easy money in the system? Supply is out of whack not only due to supply side issues, but also because demand is so strong even in the face of those supply side issues due to far too much money in the system.

You thought those multiple rounds of trillion dollar plus stimuli had no consequences?

Exactly. It is amazing to me that people think their house value doubled in two or three years because they are so awesome at real estate investments. It’s a sign of a completely disastrous economy, and it’s not real money. It’s about to all go away very soon, and honestly, the Fed should have started these interest rate hikes a while ago.

[Anonymous]

All I know is that I bought a $250 set of linen sheets from Lands End today for $79.

[Anonymous]

Raising rates will make fuel cheaper. It reduces overall demand in the economy through a number of mechanisms. For example higher rates result in more money going to savers and less to borrowers- and borrowers tend to spend more.

[Anonymous]

To me it seems like this is all going to further widen the gap between the rich and poor. I have a 2% mortgage, several hundred thousand liquid, already 2 paid of cars, kids in public k, i feel like as long as i have a job i will be a massive winner from this and people just starting out trying to get a mortgage, trying to get a car loan, putting a kid in daycare will suffer terribly. Please tell me i am being too pessimistic and Debbie downer and things are not that bad for those that are less financially secure.

[Anonymous]

Anonymous wrote:To me it seems like this is all going to further widen the gap between the rich and poor. I have a 2% mortgage, several hundred thousand liquid, already 2 paid of cars, kids in public k, i feel like as long as i have a job i will be a massive winner from this and people just starting out trying to get a mortgage, trying to get a car loan, putting a kid in daycare will suffer terribly. Please tell me i am being too pessimistic and Debbie downer and things are not that bad for those that are less financially secure.

Same.

[Anonymous]

Raising rates weakens demand fool you dig? We have a demand supply imbalance. Those tools that the geezer Powell can utilize can only do so much

[Anonymous]

They don't know what they are doing. Biden is an idiot as well.

[Anonymous]

Anonymous wrote:How do you not understand multiple-trillion dollars stimuli + expansion of money supply by almost double + a bloated Fed balance sheet that grew to the size of $9,000,000,000,000?

Put down the CNN/partisan talking points and look at the common sense numbers. Maybe, just maybe there was too much money, liquidity, and access to easy money in the system? Supply is out of whack not only due to supply side issues, but also because demand is so strong even in the face of those supply side issues due to far too much money in the system.

You thought those multiple rounds of trillion dollar plus stimuli had no consequences?

You do realize that half the Covid stimulus was signed into law by your hero Donald Trump?

[Anonymous]

Anonymous wrote:They don't know what they are doing. Biden is an idiot as well.

They do as much as a anyone does. More than you

[Anonymous]

You are correct that the interest rate hikes will not solve the supply chain problems. They could destroy demand, which would also have the effect of curbing inflation. Of course, they way they will probably do that is by tipping us into a recession.

[Anonymous]

Anonymous wrote:To me it seems like this is all going to further widen the gap between the rich and poor. I have a 2% mortgage, several hundred thousand liquid, already 2 paid of cars, kids in public k, i feel like as long as i have a job i will be a massive winner from this and people just starting out trying to get a mortgage, trying to get a car loan, putting a kid in daycare will suffer terribly. Please tell me i am being too pessimistic and Debbie downer and things are not that bad for those that are less financially secure.

Not sure you will be a winner if your earnings fall behind inflation as they are with most people. You will lose less than folks starting out so sorta true on that front.